Question 1

Which of the following is NOT an example of positive supply-side policy?

Accepted Answer

A) Higher marginal tax rates. 
B) Eliminating excessive government regulation. 
C) Improving infrastructure. 
D) Trade liberalization. 
A) Higher marginal tax rates. 
B) Eliminating excessive government regulation. 
C) Improving infrastructure. 
D) Trade liberalization.

Question 2

What is the misery index? What are the economic conditions when it is low versus when it is high?

Accepted Answer

The misery index is a sum of the inflati

Question 3

Which of the following is a policy used to combat structural unemployment?

Accepted Answer

A) A decrease in tax rates for the purpose of increasing aggregate demand. 
B) An increase in the discount rate. 
C) Government intervention in labor markets for the purpose of holding wage increases down to 5.5 percent annually. 
D) Job training programs. 
A) A decrease in tax rates for the purpose of increasing aggregate demand. 
B) An increase in the discount rate. 
C) Government intervention in labor markets for the purpose of holding wage increases down to 5.5 percent annually. 
D) Job training programs.

Question 4

A basic contention of supply-side economists is that we should reduce the regulation of the production process.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following would be the best supply-side policy to increase AS?

Accepted Answer

A) Increase the supply of money. 
B) Increase the number of safety compliance reports. 
C) Increase capital gains taxes. 
D) Reduce marginal tax rates. 
A) Increase the supply of money. 
B) Increase the number of safety compliance reports. 
C) Increase capital gains taxes. 
D) Reduce marginal tax rates.

Question 6

In Figure 16.2,according to supply-side theorists,an increase in mandatory employee benefits would result in a

Accepted Answer

A) Movement from point A to point B. 
B) Rightward shift in the Phillips curve. 
C) Movement from point B to point A. 
D) Leftward shift in the Phillips curve. 
A) Movement from point A to point B. 
B) Rightward shift in the Phillips curve. 
C) Movement from point B to point A. 
D) Leftward shift in the Phillips curve.

Question 7

If the absolute value of the tax elasticity of supply is 2.0,a tax increase of 10 percent will decrease output by

Accepted Answer

A) 20 percent and increase tax revenues. 
B) 20 percent and decrease tax revenues. 
C) 5 percent and increase tax revenues. 
D) 5 percent and decrease tax revenues. 
A) 20 percent and increase tax revenues. 
B) 20 percent and decrease tax revenues. 
C) 5 percent and increase tax revenues. 
D) 5 percent and decrease tax revenues.

Question 8

Which of the following is the best indication that stagflation is occurring?

Accepted Answer

A) Rising unemployment rate and falling inflation rate. 
B) Rising unemployment rate and rising inflation rate. 
C) Falling unemployment rate and falling inflation rate. 
D) Falling unemployment rate and rising inflation rate. 
A) Rising unemployment rate and falling inflation rate. 
B) Rising unemployment rate and rising inflation rate. 
C) Falling unemployment rate and falling inflation rate. 
D) Falling unemployment rate and rising inflation rate.

Question 9

Which of the following will cause the Phillips curve to shift to the left?

Accepted Answer

A) Attacks by terrorists. 
B) Increasing regulation in the economy. 
C) Increasing the marginal tax rate on excess profit. 
D) Job search assistance. 
A) Attacks by terrorists. 
B) Increasing regulation in the economy. 
C) Increasing the marginal tax rate on excess profit. 
D) Job search assistance.

Question 10

According to supply-side theory,which of the following will shift the aggregate supply curve to the right?

Accepted Answer

A) A higher minimum wage. 
B) A reduction in spending on education. 
C) Higher marginal tax rates. 
D) A reduction in discrimination. 
A) A higher minimum wage. 
B) A reduction in spending on education. 
C) Higher marginal tax rates. 
D) A reduction in discrimination.

Question 11

An increase in the restrictions on immigration will shift the

Accepted Answer

A) AD curve to the right. 
B) AS curve to the right. 
C) AS curve to the left. 
D) None of the choices are correct. 
A) AD curve to the right. 
B) AS curve to the right. 
C) AS curve to the left. 
D) None of the choices are correct.

Question 12

What is the outcome of demand-side policies when aggregate supply is upward-sloping?

Accepted Answer

In the upward-sloping portion of the agg

Question 13

A progressive tax system

Accepted Answer

A) Means higher marginal tax rates at higher income levels. 
B) Provides more work incentives than a system with constant marginal tax rates. 
C) Promotes more investment than a system with constant marginal tax rates. 
D) Means lower marginal tax rates at higher income levels. 
A) Means higher marginal tax rates at higher income levels. 
B) Provides more work incentives than a system with constant marginal tax rates. 
C) Promotes more investment than a system with constant marginal tax rates. 
D) Means lower marginal tax rates at higher income levels.

Question 14

Which of the following is an accurate statement about the aggregate supply curve?

Accepted Answer

A) Keynesians view it as vertical up until full employment,at which point it becomes horizontal. 
B) Monetarists view it as horizontal. 
C) The consensus view is that it begins as horizontal,then starts to slope upward to the right as the economy approaches full employment,and eventually becomes vertical beyond full employment. 
D) The Keynesian view is that it is vertical. 
A) Keynesians view it as vertical up until full employment,at which point it becomes horizontal. 
B) Monetarists view it as horizontal. 
C) The consensus view is that it begins as horizontal,then starts to slope upward to the right as the economy approaches full employment,and eventually becomes vertical beyond full employment. 
D) The Keynesian view is that it is vertical.

Question 15

The transportation,communications,education,judicial,and other institutional systems that facilitate exchanges are referred to as

Accepted Answer

A) Infrastructure. 
B) Regulatory costs. 
C) Trade barriers. 
D) Transfer payments. 
A) Infrastructure. 
B) Regulatory costs. 
C) Trade barriers. 
D) Transfer payments.

Question 16

The idea that a shift in aggregate demand affects both inflation and unemployment is consistent with

Accepted Answer

A) The Keynesian view of the economy. 
B) The consensus view of the economy. 
C) The monetarist view of the economy. 
D) A vertical aggregate demand curve. 
A) The Keynesian view of the economy. 
B) The consensus view of the economy. 
C) The monetarist view of the economy. 
D) A vertical aggregate demand curve.

Question 17

Supply-side policies are designed to achieve

Accepted Answer

A) A leftward shift in the Phillips curve. 
B) A leftward shift of the aggregate supply curve. 
C) A lower inflation rate but a higher unemployment rate. 
D) A rightward shift in the Phillips curve. 
A) A leftward shift in the Phillips curve. 
B) A leftward shift of the aggregate supply curve. 
C) A lower inflation rate but a higher unemployment rate. 
D) A rightward shift in the Phillips curve.

Question 18

The Phillips curve implies a trade-off between interest rates and unemployment.

Accepted Answer

A) True 
 B)False

Question 19

What impact do transfer payments have?

Accepted Answer

A) They reduce the incentive to work and shift AS to the right. 
B) They reduce the incentive to work and shift AS to the left. 
C) They increase the incentive to work and shift AS to the right. 
D) They increase the incentive to work and shift AS to the left. 
A) They reduce the incentive to work and shift AS to the right. 
B) They reduce the incentive to work and shift AS to the left. 
C) They increase the incentive to work and shift AS to the right. 
D) They increase the incentive to work and shift AS to the left.

Question 20

The "pay or play" approach means that

Accepted Answer

A) If the government does not pay off the deficit,deficit reduction will become the top political-economic priority. 
B) If employers do not provide training activities,they must pay the government to do so. 
C) Businesses must go along with the administration or pay the consequences. 
D) If businesses do not pay for training,workers have no obligation to work for them. 
A) If the government does not pay off the deficit,deficit reduction will become the top political-economic priority. 
B) If employers do not provide training activities,they must pay the government to do so. 
C) Businesses must go along with the administration or pay the consequences. 
D) If businesses do not pay for training,workers have no obligation to work for them.

Exam 16: Supply-Side Policy: Short-Run Options

Which of the following is NOT an example of positive supply-side policy?

What is the misery index? What are the economic conditions when it is low versus when it is high?

Which of the following is a policy used to combat structural unemployment?

A basic contention of supply-side economists is that we should reduce the regulation of the production process.

Which of the following would be the best supply-side policy to increase AS?

In Figure 16.2,according to supply-side theorists,an increase in mandatory employee benefits would result in a

If the absolute value of the tax elasticity of supply is 2.0,a tax increase of 10 percent will decrease output by

Which of the following is the best indication that stagflation is occurring?

Which of the following will cause the Phillips curve to shift to the left?

According to supply-side theory,which of the following will shift the aggregate supply curve to the right?

An increase in the restrictions on immigration will shift the

What is the outcome of demand-side policies when aggregate supply is upward-sloping?

A progressive tax system

Which of the following is an accurate statement about the aggregate supply curve?

The transportation,communications,education,judicial,and other institutional systems that facilitate exchanges are referred to as

The idea that a shift in aggregate demand affects both inflation and unemployment is consistent with

Supply-side policies are designed to achieve

The Phillips curve implies a trade-off between interest rates and unemployment.

What impact do transfer payments have?

The "pay or play" approach means that

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

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