Question 1

What are the advantages of a flat tax system?​

Accepted Answer

Answers will vary. There are certain adv...

Question 2

In 2012-13, more than one quarter of federal government spending went to Social Security and income security programs in the United States.

Accepted Answer

A) True 
 B)False

Question 3

Other things equal, the multiplier will be greater

Accepted Answer

A)  the larger the fraction of each dollar earned that goes to taxes.
B)  the larger the marginal propensity to consume.
C)  the larger the fraction of each dollar of disposable income that goes to saving.
D)  the larger the marginal propensity to save.
E)  the steeper the aggregate demand curve.F) B) and C)
G) A) and B)

Question 4

Vertical equity is the concept that people with different levels of income should be treated differently

Accepted Answer

A) True 
 B)False

Question 5

If the marginal propensity to consume (MPC)  is 4/5, a decrease in government purchases by $10 billion, other things constant, will ultimately lead to a:

Accepted Answer

A)  $30 billion increase in aggregate demand in an economy.
B)  $10 billion increase in aggregate demand in an economy
C)  $10 billion decrease in aggregate demand in an economy.
D)  $50 billion decrease in aggregate demand in an economy.
E)  $8 billion decrease in aggregate demand in an economy.F) A) and B)
G) D) and E)

Question 6

If the marginal propensity to consume is 4/5, the value of the multiplier is:

Accepted Answer

A)  20.
B)  5.
C)  1
D)  1/5
E)  0.8.F) All of the above
G) A) and E)

Question 7

A reduction in taxes, combined with an increase in government purchases in an economy, would:

Accepted Answer

A)  increase aggregate demand and close a recessionary gap in the economy.
B)  decrease aggregate demand and create a recessionary gap in the economy
C)  leave aggregate demand unchanged and create a recessionary gap in the economy.
D)  have an indeterminate effect on aggregate demand and close a recessionary gap in the economy.
E)  have an indeterminate effect on aggregate demand and create a recessionary gap in the economyF) C) and E)
G) B) and E)

Question 8

The U.S. government funds deficit spending by:

Accepted Answer

A)  issuing bonds
B)  redeeming bonds.
C)  increasing taxes
D)  selling government services.
E)  decreasing taxes.F) B) and D)
G) All of the above

Question 9

Supply-side economists encourage government to reduce taxes, deregulate, and increase spending on research and development because they think that these types of policies lead to greater long-run economic growth

Accepted Answer

A) True 
 B)False

Question 10

If the marginal propensity to consume is 0.8, a $200 billion increase in government purchases, other things constant, would:

Accepted Answer

A)  increase consumption in the first round by $80 billion and overall aggregate demand by $400 billion.
B)  increase consumption in the first round by $160 billion and overall aggregate demand by $1 trillion.
C)  increase consumption in the first round by $200 billion and overall aggregate demand by $1 trillion.
D)  increase consumption in the first round by $800 billion and overall aggregate demand by $4 trillion
E)  increase consumption in the first round by $400 billion and overall aggregate demand by $4 trillion.F) B) and E)
G) B) and C)

Question 11

The administrative burden of taxation refers to the

Accepted Answer

A)  disincentive for individuals and businesses to work to generate income.
B)  individuals' cost of preparing tax returns and the government's cost of enforcing tax laws.
C)  opportunity cost of social programs
D)  net interest that must be paid on the national debt
E)  amount of taxes that has to be paid by individuals and corporates.F) A) and C)
G) B) and E)

Question 12

Each additional round of the multiplier process will tend to be larger:

Accepted Answer

A)  the smaller the marginal propensity to consume.
B)  the greater the rate of taxes.
C)  the less people save from increases in their incomes
D)  the larger the fraction of each dollar of domestic income spent on imported goods
E)  the larger the marginal propensity to save.F) B) and C)
G) A) and E)

Question 13

Among the following marginal propensity to consume (MPC)  values, which one would have the highest multiplier effect?

Accepted Answer

A)  1/3
B)  2/3
C)  3/4
D)  2/5
E)  1/5​F) A) and C)
G) A) and E)

Question 14

Why don't governments avoid budget deficits under all circumstances?​

Accepted Answer

Answers will vary. Budget deficits can b...

Question 15

A change in taxes primarily affects aggregate demand by altering:

Accepted Answer

A)  exports and net exports
B)  investment by an equal and opposite amount.
C)  disposable income and consumption spending.
D)  government purchases by an equal amount.
E)  imports and net exportsF) A) and E)
G) C) and D)

Question 16

An investment tax credit, which lowers taxes for firms that invest in new capital equipment, would shift the long-run aggregate supply curve of an economy to the right over time.

Accepted Answer

A) True 
 B)False

Question 17

When payroll taxes and Medicare are taken into consideration, the tax system in the United States becomes more progressive than when viewing the federal income tax individually

Accepted Answer

A) True 
 B)False

Question 18

Which policy would a supply-sider prefer-an across-the-board tax reduction in income tax rates or a package of tax-relief measures that would give every household a $200 tax rebate and allow them to deduct the interest they pay on credit card purchases?

Accepted Answer

Answers will vary. Supply-siders would p...

Question 19

Suppose a flat tax plan allows individuals to deduct a standard allowance of $25,000 from their wages and the flat tax rate is 12 percent. An individual earning $20,000 a year would pay:

Accepted Answer

A)  $2,400 in taxes
B)  $1,200 in taxes
C)  $3,000 in taxes
D)  $0 in taxes
E)  $2,000 in taxesF) C) and E)
G) B) and E)

Question 20

Would a tax on prescriptions drugs be more likely to be progressive or regressive? Why?

Accepted Answer

Answers will vary. A tax on prescription...

Exam 14: Fiscal Policy

If the marginal propensity to consume is 0.8, a $200 billion increase in government purchases, other things constant, would:

Correct AnswerverifiedShow Answer

Each additional round of the multiplier process will tend to be larger:

Correct AnswerverifiedShow Answer

Why don't governments avoid budget deficits under all circumstances?​

Correct AnswerverifiedAnswers will vary. Budget deficits can b...View AnswerShow Answer

A reduction in taxes, combined with an increase in government purchases in an economy, would:

Correct AnswerverifiedShow Answer

Among the following marginal propensity to consume (MPC) values, which one would have the highest multiplier effect?

Correct AnswerverifiedShow Answer

Suppose a flat tax plan allows individuals to deduct a standard allowance of $25,000 from their wages and the flat tax rate is 12 percent. An individual earning $20,000 a year would pay:

Correct AnswerverifiedShow Answer

The administrative burden of taxation refers to the

Correct AnswerverifiedShow Answer

If the marginal propensity to consume is 4/5, the value of the multiplier is:

Correct AnswerverifiedShow Answer

Other things equal, the multiplier will be greater

Correct AnswerverifiedShow Answer

An investment tax credit, which lowers taxes for firms that invest in new capital equipment, would shift the long-run aggregate supply curve of an economy to the right over time.

Correct AnswerverifiedShow Answer

The U.S. government funds deficit spending by:

Correct AnswerverifiedShow Answer

Which policy would a supply-sider prefer-an across-the-board tax reduction in income tax rates or a package of tax-relief measures that would give every household a $200 tax rebate and allow them to deduct the interest they pay on credit card purchases?

Correct AnswerverifiedAnswers will vary. Supply-siders would p...View AnswerShow Answer

A change in taxes primarily affects aggregate demand by altering:

Correct AnswerverifiedShow Answer

If the marginal propensity to consume (MPC) is 4/5, a decrease in government purchases by $10 billion, other things constant, will ultimately lead to a:

Correct AnswerverifiedShow Answer

What are the advantages of a flat tax system?​

Correct AnswerverifiedAnswers will vary. There are certain adv...View AnswerShow Answer

In 2012-13, more than one quarter of federal government spending went to Social Security and income security programs in the United States.

Correct AnswerverifiedShow Answer

When payroll taxes and Medicare are taken into consideration, the tax system in the United States becomes more progressive than when viewing the federal income tax individually

Correct AnswerverifiedShow Answer

Would a tax on prescriptions drugs be more likely to be progressive or regressive? Why?

Correct AnswerverifiedAnswers will vary. A tax on prescription...View AnswerShow Answer

Vertical equity is the concept that people with different levels of income should be treated differently

Correct AnswerverifiedShow Answer

Supply-side economists encourage government to reduce taxes, deregulate, and increase spending on research and development because they think that these types of policies lead to greater long-run economic growth

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
verified

Why don't governments avoid budget deficits under all circumstances?

Correct Answer
verified
Answers will vary. Budget deficits can b...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Answers will vary. Supply-siders would p...
View Answer

Correct Answer
verified

Correct Answer
verified

What are the advantages of a flat tax system?

Correct Answer
verified
Answers will vary. There are certain adv...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Answers will vary. A tax on prescription...
View Answer

Correct Answer
verified

Correct Answer
verified