Question 1

If the deficit is 0.1 times GDP,the existing debt-GDP ratio is 0.5,and the growth rate of nominal GDP is 0.04,then the change in the debt-GDP ratio is

Accepted Answer

A) +0.08 
B) +0.075. 
C) 0) 
D) -0.075. 
A) +0.08 
B) +0.075. 
C) 0) 
D) -0.075.

Question 2

The marginal tax rate is

Accepted Answer

A) the fraction of an additional dollar of income that must be paid in taxes. 
B) the total amount of taxes paid divided by after-tax income. 
C) the total amount of taxes paid divided by before-tax income. 
D) the average amount of government spending that is financed by taxes. 
A) the fraction of an additional dollar of income that must be paid in taxes. 
B) the total amount of taxes paid divided by after-tax income. 
C) the total amount of taxes paid divided by before-tax income. 
D) the average amount of government spending that is financed by taxes.

Question 3

From 1945 to 1995,the debt-GDP ratio in the United States

Accepted Answer

A) steadily fell. 
B) steadily increased. 
C) fell from 1945 until around 1970 and rose thereafter. 
D) fell from 1945 until around 1980 and rose thereafter. 
A) steadily fell. 
B) steadily increased. 
C) fell from 1945 until around 1970 and rose thereafter. 
D) fell from 1945 until around 1980 and rose thereafter.

Question 4

Suppose that the federal income tax on individuals is set up as follows:
Income above Income below Taxes
0 $8000 0.10 × income
$8000 $35,000 $800 + [0.15 × (income - $8000)]
$35,000 & up $4850 + [0.25 × (income - $35,000)]
Calculate the average tax rate and marginal tax rate for workers with the following levels of income:
(a)$6500
(b)$27,000
(c)$72,000
(d)$250,000

Accepted Answer

(a)MTR = .10.
(b)T = 800 + [(27,000 - 80

Question 5

A decrease in the marginal tax rate,with the average tax rate held constant,will

Accepted Answer

A) increase the amount of labor supplied at any real wage. 
B) not affect the amount of labor supplied at any real wage. 
C) decrease the amount of labor supplied at any real wage. 
D) increase the amount of labor supplied at any real wage if the average tax rate is above the marginal tax rate, but decrease the amount of labor supplied at any real wage if the average tax rate is below the marginal tax rate. 
A) increase the amount of labor supplied at any real wage. 
B) not affect the amount of labor supplied at any real wage. 
C) decrease the amount of labor supplied at any real wage. 
D) increase the amount of labor supplied at any real wage if the average tax rate is above the marginal tax rate, but decrease the amount of labor supplied at any real wage if the average tax rate is below the marginal tax rate.

Question 6

Social Security benefits could be reduced in each of the following ways except

Accepted Answer

A) cutting the promised monthly benefit. 
B) increasing the retirement age. 
C) investing the trust fund in the stock market. 
D) reducing the degree to which benefits are adjusted for inflation. 
A) cutting the promised monthly benefit. 
B) increasing the retirement age. 
C) investing the trust fund in the stock market. 
D) reducing the degree to which benefits are adjusted for inflation.

Question 7

An example of an automatic stabilizer is

Accepted Answer

A) consumer spending. 
B) inflation. 
C) unemployment insurance. 
D) discretionary fiscal policy. 
A) consumer spending. 
B) inflation. 
C) unemployment insurance. 
D) discretionary fiscal policy.

Question 8

What are the main reasons (give at least three)that Ricardian equivalence might not hold?

Accepted Answer

People may face borrowing cons

Question 9

Assume that the lost output due to tax distortions is proportional to the square of the tax rate.If the average cost of the distortion created by taxes is currently $1000,and the tax rate is increased from 40% to 50%,the average cost of the distortion created by taxes will increase to

Accepted Answer

A) $383.33. 
B) $450.00. 
C) $640. 
D) $1562.50. 
A) $383.33. 
B) $450.00. 
C) $640. 
D) $1562.50.

Question 10

Net interest payments by the government are usually

Accepted Answer

A) small and sometimes negative for both the federal, and state and local governments. 
B) small and sometimes negative for the federal government, but large and positive for state and local governments. 
C) small and sometimes negative for state and local governments, but large and positive for the federal government. 
D) large and positive for both the federal, and state and local governments. 
A) small and sometimes negative for both the federal, and state and local governments. 
B) small and sometimes negative for the federal government, but large and positive for state and local governments. 
C) small and sometimes negative for state and local governments, but large and positive for the federal government. 
D) large and positive for both the federal, and state and local governments.

Question 11

State governments in the United States can raise revenue by all the following means except

Accepted Answer

A) increasing income taxes. 
B) increasing taxes on corporate profits. 
C) increasing sales taxes. 
D) increasing the money supply. 
A) increasing income taxes. 
B) increasing taxes on corporate profits. 
C) increasing sales taxes. 
D) increasing the money supply.

Question 12

Taxes distort economic behavior because they

Accepted Answer

A) change the composition of income and spending. 
B) cause deviations in economic behavior from the efficient, free-market outcome. 
C) change the balance between private and public expenditures. 
D) change the composition of consumption, investment, government spending, and net exports. 
A) change the composition of income and spending. 
B) cause deviations in economic behavior from the efficient, free-market outcome. 
C) change the balance between private and public expenditures. 
D) change the composition of consumption, investment, government spending, and net exports.

Question 13

According to current projections,in about 2034,the Social Security trust fund will

Accepted Answer

A) own all the government bonds that have been issued. 
B) own about half of all the stock issued on the New York Stock Exchange. 
C) run out of assets. 
D) start to run deficits. 
A) own all the government bonds that have been issued. 
B) own about half of all the stock issued on the New York Stock Exchange. 
C) run out of assets. 
D) start to run deficits.

Question 14

The primary deficit is equal to

Accepted Answer

A) outlays - tax revenues. 
B) government purchases + transfers + net interest - tax revenues. 
C) outlays + net interest - tax revenues. 
D) government purchases + transfers - tax revenues. 
A) outlays - tax revenues. 
B) government purchases + transfers + net interest - tax revenues. 
C) outlays + net interest - tax revenues. 
D) government purchases + transfers - tax revenues.

Question 15

In an all-currency economy in which real output and the real interest rate are fixed and the rates of money growth and inflation are constant,the inflation rate equals

Accepted Answer

A) the real interest rate. 
B) the nominal interest rate. 
C) the growth rate of the nominal money supply. 
D) the level of real seignorage revenue. 
A) the real interest rate. 
B) the nominal interest rate. 
C) the growth rate of the nominal money supply. 
D) the level of real seignorage revenue.

Question 16

U.S.data suggest that the U.S.economy is located where on the Laffer curve?

Accepted Answer

A) On the right side, after the peak in tax revenue. 
B) On the left side, before the peak in tax revenue. 
C) At the peak in tax revenue. 
D) The economy was on the right side before the 1980s and on the left side after 1980. 
A) On the right side, after the peak in tax revenue. 
B) On the left side, before the peak in tax revenue. 
C) At the peak in tax revenue. 
D) The economy was on the right side before the 1980s and on the left side after 1980.

If the deficit is 0.1 times GDP,the existing debt-GDP ratio is 0.5,and the growth rate of nominal GDP is 0.04,then the change in the debt-GDP ratio is

The marginal tax rate is

From 1945 to 1995,the debt-GDP ratio in the United States

A decrease in the marginal tax rate,with the average tax rate held constant,will

Social Security benefits could be reduced in each of the following ways except

An example of an automatic stabilizer is

What are the main reasons (give at least three)that Ricardian equivalence might not hold?

Assume that the lost output due to tax distortions is proportional to the square of the tax rate.If the average cost of the distortion created by taxes is currently $1000,and the tax rate is increased from 40% to 50%,the average cost of the distortion created by taxes will increase to

Net interest payments by the government are usually

State governments in the United States can raise revenue by all the following means except

Taxes distort economic behavior because they

According to current projections,in about 2034,the Social Security trust fund will

The primary deficit is equal to

In an all-currency economy in which real output and the real interest rate are fixed and the rates of money growth and inflation are constant,the inflation rate equals

U.S.data suggest that the U.S.economy is located where on the Laffer curve?

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, output, and Employment

Consumption, saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, money, and Prices

Business Cycles

The Is-Lmad-As Model

Classical Business Cycle Analysis

Keynesianism: the Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates, business Cycles, and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Filters

Exam 15: Government Spending and Its Financing

If the deficit is 0.1 times GDP,the existing debt-GDP ratio is 0.5,and the growth rate of nominal GDP is 0.04,then the change in the debt-GDP ratio is

The marginal tax rate is

From 1945 to 1995,the debt-GDP ratio in the United States

A decrease in the marginal tax rate,with the average tax rate held constant,will

Social Security benefits could be reduced in each of the following ways except

An example of an automatic stabilizer is

What are the main reasons (give at least three)that Ricardian equivalence might not hold?

Assume that the lost output due to tax distortions is proportional to the square of the tax rate.If the average cost of the distortion created by taxes is currently $1000,and the tax rate is increased from 40% to 50%,the average cost of the distortion created by taxes will increase to

Net interest payments by the government are usually

State governments in the United States can raise revenue by all the following means except

Taxes distort economic behavior because they

According to current projections,in about 2034,the Social Security trust fund will

The primary deficit is equal to

In an all-currency economy in which real output and the real interest rate are fixed and the rates of money growth and inflation are constant,the inflation rate equals

U.S.data suggest that the U.S.economy is located where on the Laffer curve?

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, output, and Employment

Consumption, saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, money, and Prices

Business Cycles

The Is-Lmad-As Model

Classical Business Cycle Analysis

Keynesianism: the Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates, business Cycles, and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Filters