Macro Test Bank Chapter 11 PDF

26. A balanced budget occurs when a. the national debt is reduced to zero dollars. b. a budget deficit during one year is matched by a budget surplus in the next year. c. transfer payments equal tax revenues. d. government expenditures...

26. A balanced budget occurs when a. the national debt is reduced to zero dollars. b. a budget deficit during one year is matched by a budget surplus in the next year. c. transfer payments equal tax revenues. d. government expenditures equal tax revenues. e. the deficit-GDP ratio equals one. ANSWER: d POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Knowledge DATE CREATED: 7/20/2017 11:05 AM DATE MODIFIED: 7/20/2017 11:05 AM 27. A budget surplus a. occurs when government expenditures exceed tax revenues. b. occurs when tax revenues exceed government expenditures. c. occurs when tax revenues exceed transfer payments. d. occurs when monetary policy works in the opposite direction of fiscal policy. e. is an impossibility. ANSWER: b POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Knowledge DATE CREATED: 7/20/2017 11:05 AM DATE MODIFIED: 7/20/2017 11:05 AM 28. A budget deficit a. occurs when government expenditures exceed tax revenues. b. occurs when tax revenues exceed government expenditures. c. occurs when transfer payments exceed tax revenues. d. will always result when Congress and the president cannot agree on expenditures. e. occurs when monetary policy works in the opposite direction of fiscal policy. ANSWER: a POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Knowledge DATE CREATED: 7/20/2017 11:05 AM DATE MODIFIED: 7/20/2017 11:05 AM 29. Fiscal policy refers to a. efforts to balance a government's budget. b. changes in the money supply to achieve particular economic goals. c. changes in government expenditures and taxation to achieve particular economic goals. d. the change in private expenditures that occurs as a consequence of changes in government spending. ANSWER: c POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Knowledge DATE CREATED: 7/20/2017 11:05 AM DATE MODIFIED: 7/20/2017 11:05 AM 30. Suppose Congress increases income taxes. This is an example of a. expansionary fiscal policy. b. expansionary monetary policy. c. contractionary fiscal policy. d. contractionary monetary policy. ANSWER: c POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:05 AM DATE MODIFIED: 7/20/2017 11:05 AM 31. Suppose Congress decreases income taxes. This is an example of a. expansionary fiscal policy. b. expansionary monetary policy. c. contractionary fiscal policy. d. contractionary monetary policy. ANSWER: a POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:05 AM DATE MODIFIED: 7/20/2017 11:05 AM 32. Expansionary fiscal policy actions include __________ government spending and/or __________ taxes, while contractionary fiscal policy actions include __________ government spending and/or __________ taxes. a. increasing; increasing; decreasing; decreasing b. decreasing; decreasing; increasing; increasing c. increasing; decreasing; increasing; decreasing d. decreasing; increasing; increasing; decreasing e. increasing; decreasing; decreasing; increasing ANSWER: e POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:05 AM DATE MODIFIED: 7/20/2017 11:05 AM 33. __________ flows from government to households. a. A transfer payment b. A tax payment c. The Laffer Curve d. Crowding out ANSWER: a POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:05 AM DATE MODIFIED: 7/20/2017 11:05 AM 34. An expansionary fiscal policy will a. always result in a budget deficit. b. always result in a budget surplus. c. sometimes result in a budget deficit. d. never result in a budget surplus. e. More information is necessary to answer this question. ANSWER: c POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:05 AM DATE MODIFIED: 7/20/2017 11:05 AM 35. When the economy is in a recessionary gap, Keynesian economists will often advocate expansionary policy measures. Why? a. Keynesians believe the economy sometimes gets stuck in a recessionary gap and can't get itself out without government intervention. b. Keynesians believe the economy itself sometimes takes too long to eliminate the recessionary gap and return to full-employment output. c. Keynesians are generally in favor of increasing taxes. d. a and b e. a and c ANSWER: d POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:05 AM DATE MODIFIED: 7/20/2017 11:05 AM 36. Suppose aggregate demand is too low to bring about the Natural Real GDP level. A Keynesian policy prescription would call for a(n) _____________________ to close this recessionary gap. a. increase in government spending b. decrease in government spending c. increase in taxes d. decrease in taxes e. a or d ANSWER: e POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:05 AM DATE MODIFIED: 7/20/2017 11:05 AM 37. An example of automatic fiscal policy is a. the unemployed automatically become eligible for unemployment benefits when they lose their jobs in a recession. b. when interest rates automatically fall in a recession. c. Congress passes a law during a recession that automatically extends unemployment benefits for those whose benefits will soon expire. d. a and b e. a, b and c ANSWER: a POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:05 AM DATE MODIFIED: 7/20/2017 11:05 AM 38. Suppose the economy is at a point below its physical production possibilities frontier but above its institutional production possibilities frontier. In response to this situation, Keynesian economists may propose that government enact __________ fiscal policy to correct this __________ gap by __________ government expenditures. a. expansionary; inflationary; increasing b. contractionary; inflationary; decreasing c. expansionary; recessionary; increasing d. contractionary; recessionary; decreasing e. contractionary; inflationary; increasing ANSWER: b POINTS: 1 DIFFICULTY: Challenging QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:05 AM DATE MODIFIED: 7/20/2017 11:05 AM 39. Suppose the economy is at a position below its institutional production possibilities frontier. To improve this situation, Keynesian economists might propose that government __________ taxes, which will cause the aggregate demand curve to shift to the __________ and Real GDP will __________. a. increase; right; increase b. increase; left; decrease c. decrease; left; decrease d. decrease; right; decrease e. decrease; right; increase ANSWER: e POINTS: 1 DIFFICULTY: Challenging QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:05 AM DATE MODIFIED: 7/20/2017 11:05 AM 40. Suppose the economy is at a point below its institutional production possibilities frontier. To improve this situation, Keynesian economists might propose that the government should __________ expenditures, which will cause the aggregate demand curve to shift to the __________ in an attempt to close this __________ gap. a. decrease; left; inflationary b. increase; right; inflationary c. decrease; right; inflationary d. increase; right; recessionary e. decrease; left; recessionary ANSWER: d POINTS: 1 DIFFICULTY: Challenging QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 41. Reductions in private spending as a result of increased government spending or the need to finance a budget deficit is called a. pushing in. b. rushing forth. c. crowding in. d. crowding out. ANSWER: d POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Knowledge DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 42. Crowding out results in a decrease in a. transfer payments. b. defense spending. c. private spending. d. government spending. ANSWER: c POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 43. Which of the following is an example of crowding out? a. A decrease in the rate of growth of the money supply which causes a decrease in Real GDP. b. A budget deficit causes an increase in interest rates, which causes a decrease in investment spending. c. An increase in tariffs which causes a decrease in imports. d. A decrease in government housing subsidies which causes an increase in private spending on housing. ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 44. With complete crowding out, an increase in government spending a. is completely offset by a reduction in private spending. b. is matched by an increase in private spending. c. results in an increase in aggregate supply. d. results in an increase in aggregate demand. ANSWER: a POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 45. If there is complete crowding out as a result of an increase in government spending there will be a. a decrease in aggregate demand. b. no change in aggregate demand. c. an increase in aggregate demand. d. a downward movement along the aggregate demand curve. ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 46. Some economists argue that a rise in the interest rate, brought about by a rise in government borrowing in the loanable funds market to finance a budget deficit, brings in foreign funds in search of the higher interest rate return. This, in turn, dampens the rise in the interest rate. If this is true as far as it goes, there will be __________ crowding out than there would be if foreign funds did not flow into the country. a. more b. less c. the same amount of d. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 47. Suppose the government attempts to stimulate the economy by increasing spending without increasing taxes. Which of the following statements is most likely to be accepted by someone who believes in crowding out? a. The government's actions will have their intended effect. b. The government's actions will cause businesses to become more optimistic about the economy, and they will increase their output even more than the government had intended. c. The government's actions will raise interest rates, causing decreased investment and consumption, and the economy will not expand as much as the government had intended. d. This is a trick question, because the federal government is required by law to increase taxes by the same amount as it increases expenditures. ANSWER: c POINTS: 1 DIFFICULTY: Challenging QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 48. Suppose the government increases spending on public education by $700 million and individual spending on private education drops by $700 million. This is an example of a. incomplete crowding out. b. complete crowding out. c. zero crowding out. d. a and c e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 49. Suppose the government increases spending on public education by $700 million and individual spending on private education drops by $500 million. This is an example of a. incomplete crowding out. b. complete crowding out. c. zero crowding out. d. a and c e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 50. The AD curve shifts to the left with a __________ in government purchases (G) or a __________ in taxes. a. rise; rise b. rise; fall c. fall; rise d. fall; fall ANSWER: c POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 51. The AD curve shifts to the right with a __________ in government purchases (G) or a __________ in taxes. a. rise; rise b. rise; fall c. fall; rise d. fall; fall ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 52. Fiscal policy may not work as policymakers intend it to work because of a. crowding out. b. lags. c. the position of the physical production possibilities frontier. d. a and b e. a, b, and c ANSWER: d POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 53. Which of the following illustrates the data lag? a. The economy turns down on January 8, 2019, but policymakers do not figure this out until April 19, 2019. b. Policymakers wait and see what is really going on with the economy. c. Policymakers implement policy X on September 12, 2019, but the effects are not felt until six months later. d. The data lag is illustrated equally well by a, b, and c. ANSWER: a POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 8/8/2017 11:03 AM 54. Which of the following illustrates the wait-and-see lag? a. Policymakers believe an economic downturn has occurred, but they decide not to take action until they are sure. b. Policymakers are in the process of proposing policy measures to deal with the current economic slowdown. c. Policymakers first learn of the recession when it is five months old. d. Policymakers implement policy X, but it will be a few months before it starts working. e. Policymakers agree to policy X, but it will be at least two months before the policy is implemented. ANSWER: a POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 55. The lag between an increase in government spending and the impact of this increased spending on the economy is called the __________ lag. a. effectiveness b. transmission c. legislative d. data ANSWER: a POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 56. Which of the following illustrates the effectiveness lag? a. Policymakers believe an economic downturn has occurred, but they decide not to take action until they are sure. b. Policymakers are in the process of proposing policy measures to deal with the current economic slowdown. c. Policymakers first learn of the recession when it is five months old. d. Policymakers implement policy X, but it will be a few months before it starts working. e. Policymakers agree to policy X, but it will be at least two months before the policy is implemented. ANSWER: d POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 57. The period that elapses between the passage of legislation reducing taxes and the time the tax cut is put into effect is called the __________ lag. a. data b. wait-and-see c. legislative d. transmission ANSWER: d POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 58. If an individual pays an additional $0.30 in taxes as a result of a $1.00 increase in income, then that individual must have a(n) __________ tax rate of 30 percent. a. average b. fixed c. total d. marginal ANSWER: d POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM Exhibit 11-1 59. Refer to Exhibit 11-1. The economy is currently at point 1. Suppose the federal government increases purchases and there is no crowding out. As a result, the aggregate demand (AD) curve in the exhibit a. maintains its present position at AD1. b. shifts rightward, ideally so that it goes through point 2. c. shifts rightward, ideally so that it goes beyond point 2. d. shifts leftward. e. ​does not shift, but the SRAS curve will shift rightward so that it goes through point 3. ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False PREFACE NAME: EXHIBIT 11-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application NOTES: New DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 60. Refer to Exhibit 11-1. The economy is currently at point 1. In this situation, Keynesian economists would most likely propose a. an increase in government purchases. b. a decrease in government purchases. c. an increase in taxes. d. a and c e. b and c ANSWER: a POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False PREFACE NAME: EXHIBIT 11-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 61. Refer to Exhibit 11-1. The economy is currently at point 1. In this situation, supply-side economists would most likely propose _______________ to make the price level ______________ and Real GDP ___________. a. cutting marginal tax rates; fall; rise b. raising marginal tax rates; fall; rise c. raising government spending; fall; rise d. cutting government spending; rise; fall e. cutting marginal tax rates; rise; fall ANSWER: a POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False PREFACE NAME: EXHIBIT 11-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application NOTES: New DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 62. Refer to Exhibit 11-1. The economy is currently at point 1. Suppose the federal government increases purchases and there is complete crowding out. As a result, the aggregate demand (AD) curve in the exhibit a. will maintain its present position at AD1. b. will shift rightward, ideally so that it goes through point 2. c. will shift rightward, ideally so that it goes beyond point 2. d. will shift leftward. e. ​does not shift, but the SRAS curve will shift rightward so that it goes through point 3. ANSWER: a POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False PREFACE NAME: EXHIBIT 11-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application NOTES: New DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM ​ ​Exhibit 11-6 63. Refer to Exhibit 11-6. The economy is currently in short-run equilibrium producing Q1. In this situation, Keynesian economists would most likely propose a. an increase in government purchases. b. a decrease in government purchases. c. an increase in taxes. d. a or c e. b or c ANSWER: e POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False PREFACE NAME: EXHIBIT 11-6 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application NOTES: New DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 64. A curve showing the relationship between tax rates and tax revenues is called a __________ curve. a. Phillips b. Keynesian c. Gaussian d. Laffer ANSWER: d POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Knowledge DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 65. Elaine's taxable income increases by $1 and her tax payment increases by $0.28. Her marginal tax rate is a. 72 percent. b. 28 percent. c. 56 percent. d. There is not enough information to answer the question. ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM Exhibit 11-2 66. Refer to Exhibit 11-2. Compare points A and B. Which of the following is true? a. At A and B, the tax rates are the same, but tax revenues are different. b. At A tax rates are higher than at B, but tax revenues are the same at both points. c. At B tax rates are higher than at A, but tax revenues are the same at both points. d. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False PREFACE NAME: EXHIBIT 11-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 67. Refer to Exhibit 11-2. At point A, if we cut tax rates slightly, tax revenues will a. increase. b. decrease. c. will not change. d. drop to zero. ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False PREFACE NAME: EXHIBIT 11-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 68. Refer to Exhibit 11-2. At point B, if we cut tax rates slightly, tax revenues will a. increase. b. decrease. c. will not change. d. immediately drop to zero. ANSWER: a POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False PREFACE NAME: EXHIBIT 11-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 69. Refer to Exhibit 11-2. At the highest point above the horizontal axis, tax revenues a. are maximized. b. are lower than at A and higher than at B. c. are lower than at B and higher than at A. d. drop to zero. ANSWER: a POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False PREFACE NAME: EXHIBIT 11-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 70. All other things held constant, lower marginal (income) tax rates a. necessarily increase tax revenues. b. necessarily decrease tax revenues. c. decrease the attractiveness of productive activities relative to leisure and tax- avoidance activities, and shift the SRAS curve rightward. d. do not affect the attractiveness of productive activities relative to leisure and tax- avoidance activities and therefore the SRAS does not shift rightward or leftward. e. increase the attractiveness of productive activities relative to leisure and tax- avoidance activities and shift the SRAS curve rightward. ANSWER: e POINTS: 1 DIFFICULTY: Challenging QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 71. Fiscal policy is implemented primarily by a. local governments alone. b. the defense department. c. state governments alone. d. the federal government. e. state and local governments. ANSWER: d POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Knowledge DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 72. Fiscal policy refers to a. changes in the amount of government expenditures and taxes to achieve particular economic objectives. b. changes in the composition of a given amount of government expenditures to achieve particular economic objectives. c. changes in interest rates initiated by government action. d. any change in government spending or taxes that has the intended effect of destabilizing the economy. ANSWER: a POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Knowledge DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 73. When we speak of expansionary fiscal policy, we are talking about policymakers __________ government spending, or __________ taxes, or both. a. decreasing; decreasing b. increasing; increasing c. increasing; decreasing d. decreasing; increasing ANSWER: c POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 74. Suppose the economy's current AD and SRAS curves intersect to the right of Natural Real GDP. Keynesians might advise a policy of tax __________ to shift __________. a. increases; SRAS to the left b. increases; AD to the left c. cuts; SRAS to the right d. cuts; AD to the right ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 75. Between the data lag and the legislative lag falls the __________ lag. a. effectiveness b. wait-and-see c. expansionary d. transmission ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Knowledge DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 8/8/2017 11:08 AM 76. Supply-side economists believe reductions in tax rates can a. shift the aggregate demand curve to the left. b. shift the short run aggregate supply curve to the left. c. increase output and lower prices. d. decrease output and lower prices. ANSWER: c POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 77. Crowding out suggests that a. high taxes reduce both consumption and saving. b. increases in consumption are always at the expense of saving. c. increases in government spending may raise the interest rate, thereby reducing investment. d. increases in government spending will close a recessionary gap. ANSWER: c POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 78. As a result of an increase in government spending, some of the crowding out of private expenditures may come in the form of a. an increase in consumption. b. an increase in net exports. c. a decrease in taxes. d. a decrease in net exports. ANSWER: d POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 8/8/2017 11:19 AM 79. Increased government spending and tax cuts characterize a. contractionary fiscal policy. b. expansionary fiscal policy. c. expansionary monetary policy. d. deflationary policy. e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 80. Fiscal policy is a. the money supply policy that the Fed pursues to achieve particular economic goals. b. the spending and tax policy that the government pursues to achieve particular macroeconomic goals. c. the investment policy that businesses pursue to achieve particular macroeconomic goals. d. the spending and saving policy that consumers pursue to achieve particular macroeconomic goals. e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 81. An example of expansionary fiscal policy is a. an increase in government spending, or an increase in taxes, or both. b. a decrease in government spending, or a decrease in taxes, or both. c. an increase in government spending, or a decrease in taxes, or both. d. a decrease in government spending, or an increase in taxes, or both. e. holding government spending constant while increasing taxes. ANSWER: c POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 82. An example of contractionary fiscal policy is a. an increase in government expenditures, or an increase in taxes, or both. b. a decrease in government expenditures, or a decrease in taxes, or both. c. an increase in government expenditures, or a decrease in taxes, or both. d. a decrease in government expenditures, or an increase in taxes, or both. e. increasing government expenditures while holding taxes constant. ANSWER: d POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 83. An example of expansionary fiscal policy is a. increasing government expenditures. b. increasing taxes. c. decreasing government expenditures. d. decreasing taxes. e. a and d ANSWER: e POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 84. An example of contractionary fiscal policy is a. increasing government spending. b. increasing taxes. c. decreasing government spending. d. decreasing taxes. e. b and c ANSWER: e POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 85. To eliminate a recessionary gap, Keynesian theory indicates that government should a. increase taxes. b. decrease taxes. c. increase government purchases. d. decrease government purchases. e. b or c ANSWER: e POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 8/8/2017 11:49 AM 86. To eliminate an inflationary gap, Keynesian theory indicates that government should a. increase taxes. b. decrease taxes. c. increase government purchases. d. decrease government purchases. e. either a or d ANSWER: e POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 87. Keynesians a. advocate for a laissez-faire approach. b. believe that equilibrium may exist at less than full employment. c. believe in the use of fiscal policy to stabilize the economy. d. b and c e. all of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 8/8/2017 12:12 PM 88. When a decrease in one or more components of private spending completely offsets an increase in government spending, there is a. incomplete crowding out. b. zero crowding out. c. complete crowding out. d. complete crowding in. e. either c or d ANSWER: c POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 89. The transmission lag is the time between a. the implementation of a policy and when the impact of the policy is felt. b. the enactment of a policy (getting a policy passed by Congress with the president's approval) and the implementation of the policy (putting a policy into effect). c. realizing a policy is needed and enacting the policy. d. the occurrence of an event and policymakers realizing the event has occurred. ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 90. The effectiveness lag is the time between a. the implementation of a policy and when the impact of the policy is felt. b. the enactment of a policy and the implementation of the policy. c. realizing a policy is needed and enacting the policy. d. the occurrence of an event and policymakers realizing the event has occurred. ANSWER: a POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 91. The data lag is the time between a. the implementation of a policy and when the impact of the policy is felt. b. the enactment of a policy and the implementation of the policy. c. realizing a policy is needed and enacting the policy. d. the occurrence of an event and policymakers realizing the event has occurred. ANSWER: d POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 92. The Laffer curve illustrates that a. there are two tax rates at which zero tax revenues are raised. b. a decrease in tax rates can cause an increase in tax revenues. c. an increase in tax rates can cause an increase in tax revenues. d. an increase in tax rates can cause a decrease in tax revenues. e. all of the above ANSWER: e POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 93. Complete crowding out implies that as government increases purchases by $1, a. private spending decreases by $1. b. Real GDP remains unchanged. c. there is an equal offsetting decrease in one or more of the components of private expenditures. d. all of the above e. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 94. A permanent marginal tax decrease is likely to a. shift the short-run aggregate supply curve to the left and the long-run aggregate supply curve to the right. b. shift both the short-run and the long-run aggregate supply curves to the left. c. shift the short-run aggregate supply curve to the right, and the long-run aggregate supply curve to the left. d. shift both the short run and the long run aggregate supply curves to the right. ANSWER: d POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 95. If an economist recommends that the government reduce the tax rate in order to increase tax revenues (based on the Laffer curve), she is implicitly assuming that the economy is currently operating at a point a. inside the Laffer curve. b. outside the Laffer curve. c. on the upward-sloping portion of the Laffer curve. d. on the downward-sloping portion of the Laffer curve. e. where tax revenues are maximized. ANSWER: d POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 96. If there is complete crowding out, the change in Real GDP that results from a given change in autonomous spending will be a. zero. b. greater than if there was incomplete crowding out. c. infinite. d. There is not enough information to answer the question. ANSWER: a POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 97. Some economists believe that higher marginal income tax rates __________ the incentive to work and thus shift the __________. a. increase; AD curve to the right b. increase; SRAS curve to the right c. increase; SRAS curve to the left d. decrease; AD curve to the left e. decrease; SRAS curve to the left ANSWER: e POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 98. Some economists believe that permanently lower marginal income tax rates __________ the incentive to work and thus shift the __________. a. increase; LRAS curve to the right b. increase; AD curve to the right c. increase; SRAS curve to the left d. decrease; LRAS curve to the right e. decrease; AD curve to the left ANSWER: a POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 99. The Laffer curve makes the point that cutting a very high marginal tax rate can __________ the tax base enough so that tax revenues __________. a. lower; rise b. lower; fall c. raise; rise d. raise; fall ANSWER: c POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 100. Suppose that in a certain nation the flat income tax rate of 40 percent is reduced to 35 percent and as a result the tax base rises from $400 billion to $600 billion. As a result, ax revenues __________, indicating the nation is on the __________ portion of its Laffer curve. a. rise; upward-sloping b. rise; downward-sloping c. fall; upward-sloping d. fall; downward-sloping ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 101. The marginal tax rate is equal to the a. total amount of a person's tax payment divided by the total amount of the person's taxable income. b. total amount of a person's tax payment divided by the change in the person's taxable income. c. change in the person's tax payment divided by the total amount of the person's taxable income. d. change in the person's tax payment divided by the change in the person's taxable income. ANSWER: d POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 102. Which of the following is not an example of a "lag" that diminishes the potential impact of the use of fiscal policy? a. the data lag b. the recessionary lag c. the legislative lag d. the transmission lag e. None of the above; all are examples of such lags. ANSWER: b POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 8/8/2017 1:07 PM 103. There is zero crowding out and the federal budget is balanced at the time government purchases are increased. It follows that the __________ curve shifts to the __________, and in the short run both the price level and Real GDP __________. a. AD; left; rise b. AD; right; fall c. AD; right; rise d. AD; left; fall e. SRAS; right; rise ANSWER: c POINTS: 1 DIFFICULTY: Challenging QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 104. The economy is in a recessionary gap and a Keynesian economist advocates expansionary fiscal policy. What is a likely reason this economist advocates expansionary fiscal policy? a. The economist believes the economy is stuck in a recessionary gap and crowding out will be complete. b. The economist believes the economy is stuck in a recessionary gap and there will be no crowding out. c. The economist believes that wages are too flexible and that crowding out will be incomplete. d. The economist believes the AD curve is downward-sloping, the SRAS curve is upward-sloping, and prices are flexible. e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 105. The economy is in a recessionary gap, wages are inflexible downward, and there is complete crowding out. Which of the following is consistent with this state of affairs? a. The economy will soon self-regulate and produce Natural Real GDP. b. Expansionary fiscal policy will be effective at removing the economy from the recessionary gap. c. If expansionary fiscal policy is implemented, the AD curve will shift to the right, and eventually the price level and Real GDP will rise. d. b and c e. none of the above ANSWER: e POINTS: 1 DIFFICULTY: Challenging QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 106. Suppose government spending rises by $120 billion. It follows that if private expenditures a. rise by $120 billion, complete crowding out exists. b. fall by $100 billion, incomplete crowding out exists. c. remain unchanged, complete crowding out exists. d. rise by more than $120 billion, complete crowding out exists. e. b and c ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 107. Smith says that if government purchases rise by $100 billion, the AD curve will shift to the right. Jones says that if government purchases rise by $100 billion, the AD curve will not shift to the right. It follows that a. Smith believes there will be zero or complete crowding out and Jones believes there will be complete crowding out. b. Smith believes there will be incomplete or zero crowding out and Jones believes there will be complete crowding out. c. Smith believes there will be complete crowding out and Jones believes there will be zero crowding out. d. Both Smith and Jones believe there will be incomplete crowding out, although Jones believes there will be more incomplete crowding out than Smith believes there will be. e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 108. The economy is in a recessionary gap, there is incomplete crowding out, and government implements expansionary fiscal policy. It follows that a. Real GDP will fall. b. the AD curve will shift to the right. c. the price level will fall. d. the recessionary gap will necessarily be completely eliminated. e. b and d ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 109. Expansionary fiscal policy is ineffective if a. there are idle resources in the economy. b. the MPC is less than 0.60. c. the government has a budget surplus. d. there is complete crowding out. e. a and d ANSWER: d POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 110. Tax revenues can be found by a. multiplying the tax base by the (average) tax rate. b. dividing the tax base by the (average) tax rate. c. summing the tax base and the (average) tax rate. d. multiplying taxable income by the marginal tax rate. ANSWER: a POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 111. The answer is: "Policymakers are not aware of changes in the economy as soon as they happen." What is the question? a. What is the wait-and-see lag? b. What is the data lag? c. What is the effectiveness lag? d. What is the transmission lag? e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 112. The answer is: "After a policy measure is implemented, it takes time to affect the economy." What is the question? a. What is the wait-and-see lag? b. What is the data lag? c. What is the effectiveness lag? d. What is the transmission lag? e. What is the legislative lag? ANSWER: c POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 113. The economy is in a recessionary gap. There is no crowding out and government has correctly estimated that to bring the economy into long-run equilibrium it should raise government purchases by $123 billion. If government purchases are raised by $123 billion, does it follow that the economy will be moved into long-run equilibrium? a. Yes, because all the necessary conditions for effective fiscal policy are present. b. No, because the economy may be self-regulating, and by the time expansionary fiscal policy is effective, the AD curve may intersect the SRAS curve at an inflationary-gap level of Real GDP. c. Yes, because of the validity of the balanced budget theorem. d. No, because of inflexible wages and the fact that the SRAS curve is upward-sloping. e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Challenging QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 114. Taxable income rises by $2,500 and taxes rise by $825. What is the marginal tax rate? a. 4 percent b. 29 percent c. 10 percent d. 33 percent e. 25 percent ANSWER: d POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application NOTES: New DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 8/8/2017 1:09 PM 115. Income tax revenues rise as income tax rates fall. It follows that the a. percentage cut in the tax rate is greater than the percentage increase in the tax base. b. percentage cut in the tax rate is less than the percentage increase in the tax base. c. percentage cut in the tax rate is equal to the percentage increase in the tax base. d. marginal tax rate is equal to the average tax rate e. b and d ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 116. If a person predicts that a cut in income tax rates will decrease income tax revenues, he or she implicitly assumes that the percentage __________ in the tax base will be __________ the percentage cut in the tax rate. a. rise; less than b. rise; greater than c. rise; equal to d. fall; equal to e. none of the above ANSWER: a POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 117. Suppose that income tax revenues are maximized at an average (income) tax rate of 45 percent. If the Laffer curve is a correct diagrammatic representation of the relationship between tax rates and tax revenue, it follows that a tax rate of a. 35 percent will reduce tax revenues. b. 48 percent will reduce tax revenues. c. 48 percent will generate as much tax revenue as a tax rate of 45 percent. d. 35 percent will generate as much tax revenue as a tax rate of 45 percent. e. a and b ANSWER: e POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 118. The federal budget is balanced and the economy is on the upward-sloping portion of the Laffer curve. Then, tax rates are cut and government purchases are increased. Is a budget deficit inevitable? a. No, because a cut in tax rates (on the upward-sloping portion of the Laffer curve) increases tax revenues, and if the increase in tax revenues equals the increase in government purchases there is no deficit. b. Yes, because a cut in tax rates (on the upward-sloping portion of the Laffer curve) lowers tax revenues. c. No, because a cut in tax rates (on the upward-sloping portion of the Laffer curve) decreases tax revenues, and if the decrease in tax revenues is less than the increase in government purchases there is no deficit. d. Yes, because a cut in tax rates (on the upward-sloping portion of the Laffer curve) raises interest rates, and higher interest rates discourage investment spending. ANSWER: b POINTS: 1 DIFFICULTY: Challenging QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 119. Both Jones and Smith agree that the economy is in a recessionary gap. Jones proposes a tax cut and believes that it will raise Real GDP and lower the price level. Smith agrees that a tax cut will raise Real GDP, but he argues that it will not lower the price level in the short run. It follows that a. both Jones and Smith believe that lower taxes will shift the AD curve rightward, but will not shift the SRAS curve. b. both Jones and Smith believe that lower taxes will shift the SRAS curve rightward, but will not shift the AD curve. c. Jones believes that the tax cut will shift the SRAS curve rightward and the AD curve will not shift. Smith believes that the AD curve will shift rightward and the SRAS curve will not shift. d. Smith believes that the tax cut will shift the SRAS curve rightward and the AD curve will not shift. Jones believes that the AD curve will shift rightward and the SRAS curve will not shift. ANSWER: c POINTS: 1 DIFFICULTY: Challenging QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 120. If Smith believes the economy is self-regulating, then Smith a. is less likely to advocate expansionary fiscal policy when the economy is in a recessionary gap than Jones, who believes the economy is not self-regulating. b. is more likely to advocate expansionary fiscal policy when the economy is in a recessionary gap than Jones, who believes the economy is not self-regulating. c. will believe that there is zero crowding out, too. d. will believe that wages are inflexible downward, too. e. b and d ANSWER: a POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 121. Which of the following is not an example of crowding out? a. Government purchases rise, the budget deficit rises, the federal government's demand for loanable funds rises, the interest rate rises, and investment falls. b. Government spends more on X, prompting individuals to spend less on X. c. Taxes decline, the budget deficit rises, the federal government's demand for loanable funds rises, the interest rate rises, the demand rises for U.S. dollars, the dollar appreciates, and net exports decline. d. Business firms spend more on X, prompting households to spend less on Y. e. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 122. Which piece of evidence is consistent with zero crowding out? a. Government purchases rise and Real GDP does not change. b. Government purchases rise and investment spending declines. c. Government purchases rise and net exports decline. d. Government purchases rise and consumption declines. e. none of the above ANSWER: e POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 123. If the economy is on the downward-sloping portion of the Laffer curve, a(an) __________ in tax rates will __________ tax revenues. a. decrease; reduce b. increase; raise c. decrease; raise d. decrease; not change e. increase; not change ANSWER: c POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 124. Which of the following is an example of automatic fiscal policy? a. The government deliberately raises taxes. b. The government deliberately lowers taxes. c. The government deliberately increases spending. d. The government deliberately decreases spending. e. none of the above ANSWER: e POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 125. What are the two types of discretionary fiscal policy? a. automatic and expansionary b. expansionary and contractionary c. expansionary and recessionary d. automatic and contractionary ANSWER: b POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Knowledge DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 126. According to the textbook (based upon 2014 data), if the bottom half of all U.S. income tax payers were allowed to stop paying the income tax entirely and the top 50% continued to pay as they do now, tax revenues to the government would drop by about a. 2.75 percent. b. 15.7 percent. c. 23.9 percent. d. 33.3 percent. e. 50.8 percent ANSWER: a POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Knowledge NOTES: New DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 8/8/2017 6:44 PM 127. The top 1% of income earners in the U.S. (those with the highest taxable incomes) pay a. about the same percentage of their incomes in taxes as the average U.S. taxpayer. b. a much lower percentage of their incomes in taxes than the average U.S. taxpayer. c. a much higher percentage of their incomes in taxes than the average U.S. taxpayer. d. about 15 percent of their incomes in income taxes e. a and d ANSWER: c POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Knowledge DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 128. The U.S. income tax is currently a __________ tax. a. progressive b. proportional c. regressive d. proactive ANSWER: a POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Knowledge DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 129. A "flat tax" is another term for __________ tax. a. a progressive b. a proportional c. a regressive d. the inflation ANSWER: b POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Knowledge DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 130. The unique feature of a progressive income tax is that the higher one's income (up to some point), the __________ one pays. a. more taxes b. higher the tax rate c. less taxes d. lower the tax rate e. none of the above ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 131. A taxpayer pays __________ tax rate on additional income if the income tax structure is progressive, __________ tax rate on additional income if the income tax structure is proportional, and __________ tax rate on additional income if the income tax structure is regressive. a. a higher; a lower; the same b. a higher; the same; a lower c. a lower; a higher; the same d. the same; a lower; a higher e. the same; a higher; a lower ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Comprehension DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 132. Which four federal taxes make up the bulk of federal government tax revenues? a. individual income tax, corporate income tax, property tax, and sales tax. b. corporate income tax, national consumption tax, estate tax, and social security tax. c. individual income tax, social security tax, corporate income tax, and Medicare tax. d. social security tax, Medicare tax, estate tax, and corporate income tax. e. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Knowledge NOTES: New DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 8/8/2017 5:22 PM 133. Senator Smith proposes that the income tax structure be revised to have two tax rates. The first, 16 percent, applies to persons whose income is between $0 and $40,000 a year. The second, 23 percent, applies to persons whose income is more than $40,000 a year. This is a a. regressive income tax structure. b. proportional income tax structure. c. progressive income tax structure. d. cyclical income tax structure. ANSWER: c POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 134. Which of the following statements is true? a. A budget deficit occurs when government expenditures exceed tax receipts during any single year. b. The public debt is the total amount the federal government owes its creditors. c. The public debt is greater than the net public debt. d. b and c e. a, b, and c ANSWER: e POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Knowledge DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 135. The deficit that exists when the economy operates at full employment is called the __________ deficit. a. net b. gross c. cyclical d. structural ANSWER: d POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Knowledge DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 136. That part of the deficit that results from a downturn in economic activity is called the __________ deficit. a. net b. gross c. cyclical d. structural ANSWER: c POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Knowledge DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM 137. Suppose the economy is in a recessionary gap. If government expenditures are currently $3.5 trillion and tax revenues are currently $2.9 trillion, the (total) budget deficit is _____________. Assume that economists estimate that if the economy were operating at full employment, government expenditures would be $3.2 trillion and tax revenues would be $3.1 trillion. The structural deficit must be_________________ and the cyclical deficit must be _______________. a. $3.5 trillion; $2.9 trillion; $600 billion b. $600 billion; $300 billion; $300 billion c. $600 billion; $100 billion; $500 billion d. $600 billion; $500 billion; $100 billion e. $500 billion; $100 billion; $400 billion ANSWER: c POINTS: 1 DIFFICULTY: Challenging QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application NOTES: New DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 8/8/2017 5:28 PM 138. If the structural deficit is $80 billion and the cyclical deficit is $150 billion, it follows that the __________ is __________ billion. a. public debt; $230 b. total budget deficit; $70 c. total budget deficit; $230 d. net public debt; $70 e. none of the above ANSWER: c POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application NOTES: New DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 8/8/2017 5:29 PM 139. Suppose aggregate demand is too high to bring about the Natural Real GDP level. A Keynesian policy prescription would call for a(n) _____________________ to close this inflationary gap. a. increase in government spending b. decrease in government spending c. increase in taxes d. decrease in taxes e. b or c ANSWER: e POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 7/20/2017 11:06 AM Exhibit 11-4 Taxable Income Taxes $0 - $23,000 17% of taxable income $23,001 - $42,000 $3,900 + 20% of everything over $23,000 $42,001 - $100,000 $7,710 + 30% of everything over $42,000 Greater than $100,000 $25,110 + 33% of everything over $100,000 140. Refer to Exhibit 11-4. If a person’s taxable income is $20,000, how much does he pay in taxes? a. $600 b. $34,000 c. $3,400 d. $3,000 ANSWER: c POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False PREFACE NAME: EXHIBIT 11-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application NOTES: New DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 8/8/2017 5:35 PM 141. Refer to Exhibit 11-4. If a person’s taxable income is $30,000, how much does he pay in taxes? a. $6,000 b. $1,400 c. $5,300 d. $4,850 ANSWER: c POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False PREFACE NAME: EXHIBIT 11-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application NOTES: New DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 8/8/2017 5:37 PM 142. Refer to Exhibit 11-4. If a person’s taxable income is $50,000, how much does he pay in taxes? a. $9,250 b. $10,110 c. $15,000 d. $12,500 ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False PREFACE NAME: EXHIBIT 11-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application NOTES: New DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 8/8/2017 5:39 PM 143. Refer to Exhibit 11-4. If a person’s taxable income is $90,000, how much does he pay in taxes? a. $17,600. b. $19,250. c. $8,780. d. $22,110. ANSWER: d POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False PREFACE NAME: EXHIBIT 11-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application NOTES: New DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 8/8/2017 5:42 PM 144. Use the information provided in Exhibit 11-4. If a person’s taxable income is $110,000, how much does he pay in taxes? a. $21,750 b. $33,000 c. $24,750 d. $28,410 ANSWER: d POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False PREFACE NAME: EXHIBIT 11-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application NOTES: New DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 8/8/2017 5:44 PM 145. Use the information provided in Exhibit 11-4. What is the marginal tax rate on the 23,000th of dollar of taxable income earned? a. 15% b. 17% c. 20% d. 30% e. There is not enough information provided to answer this question. ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False PREFACE NAME: EXHIBIT 11-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application NOTES: New DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 8/8/2017 5:46 PM 146. Use the information provided in Exhibit 11-4. What is the marginal tax rate on the 23,001st dollar of taxable income earned? a. 17% b. 20% c. 25% d. 30% e. There is not enough information provided to answer this question. ANSWER: b POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False PREFACE NAME: EXHIBIT 11-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application NOTES: New DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 8/8/2017 5:47 PM 147. Use the information provided in Exhibit 11-4. What is the marginal tax rate on the 42,001st dollar of taxable income earned? a. 17% b. 20% c. 30% d. 33% e. There is not enough information provided to answer this question. ANSWER: c POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False PREFACE NAME: EXHIBIT 11-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application NOTES: New DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 8/8/2017 5:48 PM 148. Based upon information provided in the textbook, in 2014 the top 50 percent of income earners in the U.S. paid about __________ percent of the total federal income taxes. a. 57.25 b. 67.25 c. 77.25 d. 87.25 e. 97.25 ANSWER: e POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Multiple Choice HAS VARIABLES: False NATIONAL STANDARDS: United States - BUSPROG: Analytic LOCAL STANDARDS: United States - OH - Default City - DISC: Monetary and fiscal policy KEYWORDS: Bloom's: Application NOTES: New DATE CREATED: 7/20/2017 11:06 AM DATE MODIFIED: 8/8/2017 6:52 PM 149. Suppose the economy is in a recessionary gap. If government expenditures are currently $700 billion and tax revenues are currently $450 billion, the (total) budget deficit is _____________. Assume that economists estimate that if the economy were operating at full emp