Question 1

The marginal tax rate is found by dividing a person's tax payment by the person's taxable income.

Accepted Answer

A) True 
 B)False

Question 2

A permanent marginal tax decrease is likely to

Accepted Answer

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. 
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.

Question 3

An example of expansionary fiscal policy is

Accepted Answer

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. 
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.

Question 4

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?

Accepted Answer

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. 
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.

Question 5

In 2013,U.S.federal government revenues (made up of taxes and fees),totaled ________ trillion.

Accepted Answer

A) $4.3 
B) $3.3 
C) $2.7 
D) $1.3 
A) $4.3 
B) $3.3 
C) $2.7 
D) $1.3

Question 6

A value-added tax (VAT)is a less visible form of a sales tax.

Accepted Answer

A) True 
 B)False

Question 7

Some economists believe that higher marginal income tax rates __________ the incentive to work and thus shift the __________.

Accepted Answer

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 
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

Question 8

An example of contractionary fiscal policy is

Accepted Answer

A) increasing government spending. 
B) increasing taxes. 
C) decreasing government spending. 
D) decreasing taxes. 
E) b and c 
A) increasing government spending. 
B) increasing taxes. 
C) decreasing government spending. 
D) decreasing taxes. 
E) b and c

Question 9

An example of automatic fiscal policy is

Accepted Answer

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 
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

Question 10

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.

Accepted Answer

A) average 
B) fixed 
C) total 
D) marginal 
A) average 
B) fixed 
C) total 
D) marginal

Question 11

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

Accepted Answer

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. 
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.

Question 12

A tax rate increase necessarily leads to an increase in tax revenue for the government.

Accepted Answer

A) True 
 B)False

Question 13

Use the information provided in Exhibit 11-4.If a person's taxable income is $110,000,how much does he pay in taxes?

Accepted Answer

A) $21,750 
B) $33,000 
C) $24,750 
D) $21,840 
A) $21,750 
B) $33,000 
C) $24,750 
D) $21,840

Question 14

The effectiveness lag is the time between

Accepted Answer

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. 
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.

Question 15

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.

Accepted Answer

A) rise;upward-sloping 
B) rise;downward-sloping 
C) fall;upward-sloping 
D) fall;downward-sloping 
A) rise;upward-sloping 
B) rise;downward-sloping 
C) fall;upward-sloping 
D) fall;downward-sloping

Question 16

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.

Accepted Answer

A) more 
B) less 
C) the same amount of 
D) none of the above 
A) more 
B) less 
C) the same amount of 
D) none of the above

Question 17

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.

Accepted Answer

A) expansionary;inflationary;increasing 
B) contractionary;inflationary;decreasing 
C) expansionary;recessionary;increasing 
D) contractionary;recessionary;decreasing 
E) contractionary;inflationary;increasing 
A) expansionary;inflationary;increasing 
B) contractionary;inflationary;decreasing 
C) expansionary;recessionary;increasing 
D) contractionary;recessionary;decreasing 
E) contractionary;inflationary;increasing

Question 18

Reductions in private spending as a result of increased government spending or the need to finance a budget deficit is called

Accepted Answer

A) pushing in. 
B) rushing forth. 
C) crowding in. 
D) crowding out. 
A) pushing in. 
B) rushing forth. 
C) crowding in. 
D) crowding out.

Question 19

The data lag is the time between

Accepted Answer

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. 
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.

Question 20

An example of contractionary fiscal policy is

Accepted Answer

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. 
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.

Exam 11: Fiscal Policy and the Federal Budget

The marginal tax rate is found by dividing a person's tax payment by the person's taxable income.

A permanent marginal tax decrease is likely to

An example of expansionary fiscal policy is

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?

In 2013,U.S.federal government revenues (made up of taxes and fees),totaled ________ trillion.

A value-added tax (VAT)is a less visible form of a sales tax.

Some economists believe that higher marginal income tax rates __________ the incentive to work and thus shift the __________.

An example of contractionary fiscal policy is

An example of automatic fiscal policy is

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.

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 tax rate increase necessarily leads to an increase in tax revenue for the government.

Use the information provided in Exhibit 11-4.If a person's taxable income is $110,000,how much does he pay in taxes?

The effectiveness lag is the time between

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.

Reductions in private spending as a result of increased government spending or the need to finance a budget deficit is called

The data lag is the time between

An example of contractionary fiscal policy is

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, controlled, and Relative

Supply,demand,and Price: Applications

Macroeconomic Measurements, part I: Prices and Unemployment

Macroeconomic Measurements, part II: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self-Regulating Economy

Keynesian Macroeconomics and Economic Instability: a Critique of the Self-Regulating Economy

Money,banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, technology, ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case for and Against Government: Five Topics Considered

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Some economists believe that higher marginal income tax rates the incentive to work and thus shift the .

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.