Macro Home work #1

Households and firms receive public goods and services in exchange for the net ___ they pay.

tax

Suppose that the government runs a budget deficit of $75 billion in year 1. Assume that the year began with a national debt of $25 billion. In year 2 the government ran a budget surplus of $50 billion. In year 3, the government spent $100 billion more than it collected in taxes. The debt is $___

150 billion.

Monetary payments in the form of ___ taxes flow to the government from households and businesses.

net

The government uses the revenue from ___ taxes to make monetary payments or expenditures in the resource and product markets.

net

Medicare taxes are an example of a:

proportional tax.

If the demand for loanable funds increases, interest rates ___ which can have big effects on consumers.

rise

At the state government level, the main sources of income are:

-state individual and corporate income taxes. -sales and excise taxes.

Suppose that tax revenue is $400 billion and that government spending is $450 billion. The budget is:

in deficit.

Budget deficits are calculated and reported on ___ basis.

annual

The type of tax (progressive, regressive, or proportional) is determined by using the ___ tax rate.

average

___ tax rate equals the amount of tax paid divided by income and multiplied by 100.

average

The government budget may be in

balance; deficit; surplus

The type of tax that is assessed is determined:

by using the average tax rate.

An opportunity cost is associated with the interest payments made on the national ___ .

debt

If the government had no national ___ it would not have to make interest payments, and other things could be done with these funds.

debt

The average tax rate:

determines whether the tax imposed is regressive, progressive, or proportional.

An average tax rate equals the amount of tax paid ___ by income and multiplied by 100.

divided

Monetary payments in the form of net taxes flow to the ___ from households and businesses.

government

Transfer payments and subsidies are payments the ___ makes to households and businesses that do not require an exchange of productive activity.

government

When the government needs to borrow money, it ___ the demand for loanable funds in the economy.

increases

An opportunity cost is associated with the ___ payments made on the national debt.

interest

A budget surplus occurs when a government receives ___ revenue than it spends in any given fiscal year.

more

Daniel has an annual taxable income of $25,000 and pays $2,500 in income taxes. Julia has a taxable income of $45,000 and pays $4,500 in income taxes. This tax is ___.

proportional

Federal income taxes are

progressive

___ tax is one in which the average tax rate stays the same as income increases.

proportional

Daniel has an annual taxable income of $25,000 and pays $2,500 a year in income taxes. Julia earns $45,000 in taxable income a year and pays $5,000 in income taxes. This tax is:

progressive.

At the federal government level, which of the following are the main sources of income?

-Individual and corporate income taxes -Excise taxes -Payroll taxes

Sources of revenue are the same for federal, state, and local governments.

F

Most economists prefer measuring the deficit relative to _______ because it places the deficit in better context and allows a comparison across time or across governments from different countries.

GDP

State governments spend money on all of the following except:

National Defense