Exam 11: Fiscal Policy and the Federal Budget

Explain the difference between a progressive income tax,a proportional income tax and a regressive income tax.Under which type of system is the federal income tax?

Exhibit 11-5 Assume that the farmer grows wheat and sells it to the miller, the miller turns the wheat into flour and sells it to the baker, and the baker turns the flour into bread and sells it to the final consumer. -Refer to Exhibit 11-5 which summarizes the situation prior to the value added tax (VAT). The value added by the farmer is ______________. If the government imposes a VAT rate of 10 percent,the farmer must pay ___________ in VAT tax and will need to raise the price he charges the miller to _______________.

The distinctive feature of a progressive tax is that the dollar value of tax paid rises as income rises.

Suppose Congress decreases income taxes.This is an example of

Over the past 50 years in the United States,tax revenues as a percentage of GDP have tended to be in the __________________ percent range.

The Laffer curve shows the exclusively direct relationship that exists between tax rates and tax revenues.

Suppose the economy is at a position below the physical production possibilities frontier but above the 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.

An example of automatic fiscal policy is

The economy is in a recessionary gap,there is incomplete crowding out,and government implements expansionary fiscal policy.It follows that

Which of the following is an example of automatic fiscal policy?

When a decrease in one or more components of private spending completely offsets the increase in government spending,there is

Complete crowding out implies that as government increases purchases by $1,

In 2011,the U.S.federal government spent approximately ___________ trillion.

Expansionary fiscal policy is ineffective if

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?

According to your text,in 2011 the top 1 percent of income earners in the U.S.earned more than $343,923.

In 2009,the top 50 percent of income earners in the U.S.paid about __________ percent of the total federal income taxes.

The transmission lag is the time between

The U.S.income tax is currently a __________ tax.

Exhibit 11-4 -Refer to Exhibit 11-4. If a person's taxable income is $20,000,how much does he pay in taxes?