econ 5-9

According to the static tax analysis approach to evaluating how changes in tax rates affect government tax​ collections, A. the tax rate will have no effect on the tax base. B. there is a maximum tax that can be charged to maximize tax revenue. C. the tax base may be influenced by tax increases. D. incentives must be examined when raising taxes.

A.

By providing information and reducing the costs of job​ search, the​ Internet's impact on the job market is to reduce A. frictional unemployment. B. seasonal unemployment. C. cyclical unemployment. D. structural unemployment.

A.

By providing information and reducing the costs of job​ search, the​ Internet's impact on the job market is to reduce A. frictional unemployment. B. seasonal unemployment. C. structural unemployment. D. cyclical unemployment.

A.

Each of the following factors has played a significant role in the rapid expansion of Medicare spending by the U.S. government except A. consumers of Medicare tend to only consume the high valued medical services. B. the profit motive of physicians and hospitals. C. government planners failed to correctly estimate the increase in consumption of medical services. D. total medical spending​ (number of consumers times the price of medical​ services) has risen rapidly in the U.S.

A.

James worked for an automobile plant that has now closed as the parts produced are no longer needed. Which type of unemployment is​ this? A. structural unemploymentstructural unemployment B. frictional unemploymentfrictional unemployment C. seasonal unemploymentseasonal unemployment D. cyclical unemploymentcyclical unemployment

A.

Market failure occurs when A. the unrestrained market economy leads to too few or too many resources going to a specific economic activity. B.the market system fails to allocate resources to each individual according to their needs. C. the market system fails to allocate resources to each individual according to their abilities. D. the market system fails to allocate an equal share of resources to all individuals.

A.

Other than correcting​ externalities, other economic functions of government include A. providing a legal​ system, allocating public​ goods, promoting​ competition, and stabilizing the economy. B. deciding what to​ produce, how to produce it and for whom to produce for all sectors of the economy. C. deciding which states may or may not impose income​ taxes, charge fees and enforce contracts. D. income redistribution and the regulation and provision of merit and demerit goods.

A.

Pollution produced by a factory is being dumped into a local river. The community uses local funds to clean the river. This is an example of A. an external cost as the​ community, not the​ factory, is paying for the clean up. B. a public good. C. an effluent fee because it is as if the factory is taxing the community. D. an external benefit since it creates jobs in environmental science.

A.

The United States Federal government receives most of its tax revenues from A. individual income taxes. B. property taxes. C. sales and excise taxes. D. corporate income taxes.

A.

The corporate income tax in the United States A. results in​ individuals' being doubly taxed on corporate earnings. B. does not apply to profits earned on exports. C. excludes dividends paid out. D. only taxes retained earnings.

A.

The labor force is equal to the number of employed plus the number of unemployed. A. True B. False

A.

What is the difference between nominal GDP and real​ GDP? A. Nominal GDP is measured in current market prices while real GDP corrects for changes in the overall level of prices from year to year. B. Nominal GDP is computed by using the expenditure approach while real GDP is computed by using the income approach. C. Nominal GDP is the total value of output produced while real GDP is the amount per individual. D. Nominal GDP represents purchasing power while real GDP is measured in terms of current dollars.

A.

Which of the following is consistent with dynamic tax​ analysis? A. An increase in the tax rate will likely cause a decrease in the tax base. B. A decrease in the tax rate will likely cause a decrease in the tax base. C. An increase in the tax rate will likely cause an increase in the tax base. D. An increase in the tax rate will have no impact on the tax base.

A.

Which of the following is not a source of funding available to​ governments? A. Stock sales. B. Taxes. C. Borrowing. D. User charges.

A.

f real GDP increases in any​ year, we know that A. the output of goods and services produced this year has increased. B. inflation has raised the value of output. C. nominal GDP must have risen. D. both inflation and output have increased.

A.

Suppose that the U.S. government determines that cigarette smoking creates social costs not reflected in the current market price and equilibrium quantity of cigarettes. A study has recommended that the government can correct for the externality effect of cigarette consumption by paying farmers not to plant tobacco used to manufacture cigarettes. It also recommends raising the funds to make these payments by increasing taxes on cigarettes. These actions by the government lead to all the following​ outcomes, except

A. a reduction in the negative externality caused by cigarette smoking. B. an increase in the negative externality caused by cigarette smoking. C.a leftward shift of the supply curve of cigarettes. D. a leftward shift of the supply curve of tobacco. B.

Subsidizing medical services through Medicare A. makes the quantity supplied of medical services smaller than the quantity demanded. B. raises the price per unit of medical care received by producers. C. lowers the price per unit of medical care received by producers. D. makes the quantity demanded of medical services smaller than the quantity supplied.

B.

The following transactions take place in​ 2000: 1. An elderly couple go to the movies and pay ​$150 for the tickets. 2. A family sells numerous​ knick-knacks at a garage sale for ​$125. 3. A young executive buys 100 shares of IBM for ​$10 comma 10,000. 4. A college student receives ​$800 from his parents. 5. A young couple down on their luck receive food stamps worth ​$230. 6. A plumber performs work for a neighbor and receives ​$125 in cash that he​ doesn't record in his​ company's records. 7. A physician operates on a​ friend's husband and charges ​$2 comma 2,000 for the operation instead of her usual ​$5 comma 5,000. 8. A teenager paints the porch on his​ parents' house. The paint cost ​$95. The cost of hiring a professional to do the job would have been ​$400. 9. A high school graduate works a summer job and makes ​$7 comma 7,000. 10. The Federal Reserve Bank sells a bond for ​$2 comma 2,000. The addition to gross domestic product is A. ​25,525. B. ​9,245. C. ​17,645. D. ​13,525.

B.

Which of the following is the most important source of revenue for the federal​ budget? A. Social Security and unemployment taxes. B. The federal personal income tax. C. The corporate income tax. D. Sales tax.

B.

A cost or benefit of an economic activity that has an impact on an​ individual's well-being, even though the individual was not directly involved in the​ activity, is known as​ a(n) A. ​free-rider. B. public good. C. externality. D. capital loss.

C.

A proportional​ tax, or​ flat-rate tax A. takes a greater percentage of a​ person's taxable income in tax as their income rises. B. takes a lesser percentage of a​ person's taxable income in tax as their income rises. C. takes the same percentage of a​ person's taxable income in tax regardless of their level of income. D. takes a greater percentage of a​ person's taxable income in tax as their income falls.

C.

Bill lends Joann​ $1,000 for a year at a nominal interest rate of 55​%. If both Bill and Joann expect the inflation rate to be 44​% next​ year, then the real rate of interest is A. 9​%. B. 20​%. C. 1​%. D. −1​%.

C.

Market failure occurs because A. the market system forces individuals to consider the social consequences of their actions. B. the market system does not make individuals responsible for the private​ costs/benefits of their actions. C. the market system does not make individuals responsible for the social​ costs/benefits of their actions. D. the market system forces individuals to consider the social and private consequences of their actions.

C.

The type of unemployment that rises as the economy goes into a recession is called A. frictional. B. structural. C. cyclical. D. seasonal.

C.

Typically during a recession A. incomes and unemployment both rise. B. incomes rise and unemployment falls. C. incomes fall and unemployment rises. D. incomes fall and unemployment falls.

C.

Which of the following is an example of a transfer paymenta transfer payment​? A. Subsidized public housingSubsidized public housing. B. MedicareMedicare. C. Social SecuritySocial Security. D. food stampsfood stamps.

C.

A price index is computed as A. ​(cost of market basket in base year divided by ÷​CPI) times ×100. B. ​(CPI divided by ÷cost of market basket in base ​year) times ×100. C. ​(cost of market basket in base year divided by ÷cost of market basket ​today) times ×100. D. ​(cost of market basket today divided by ÷cost of market basket in base ​year) times ×100.

D.

All of the following are key price indexes except the A. CPI. B. GDP deflator. C. PPI. D. KLB.

D.

Gross Domestic Product A. does not include the transfer of​ second-hand goods. B. does not include transfer payments or financial transactions. C. only includes​ "final" goods and services to avoid double counting. D. All of the above.

D.

If nominal GDP​ increases, it is possible that A. prices have increased. B. both prices and output have increased. C. output has increased. D. any of the above might have happened.

D.

Money payments made by governments to individuals for which no services or goods are concurrently rendered are known as A. black market payments. B. merit payments. C. demerit payments. D. transfer payments.

D.

People anticipate the inflation rate to be​ 8%. Banks are making loans at a​ 12% interest rate.​ Therefore, A. the real rate of interest is​ 8% and the nominal rate is​ -4%. B. the real rate of interest is​ 12% and the nominal rate is​ 4%. C. the real rate of interest is​ 12% and the nominal rate is​ 8%. D. the real rate of interest is​ 4% and the nominal rate is​ 12%.

D.

Suppose that a state government implements a tax on​ mechanics' labor time at all state auto repair shops in order to enhance its tax revenues. One year later the government is disappointed to find that not only is the amount of tax collected​ small, but that​ in-state auto repair work significantly declined. This state government apparently utilized which type of tax​ analysis? A. Dynamic tax analysis. B. Speculative tax analysis. C. Linear projection tax analysis. D. Static tax analysis.

D.

What is the structure of the U.S. income tax​ system? A. The U.S. income tax system only considers the average tax rate for an individual. B. The U.S. income tax system is a regressive tax system since higher income individuals pay a higher tax. C. The U.S. income tax system is basically a proportional tax system since all people with the same income pay the same tax. D. The U.S. income tax system is a progressive tax system where the marginal tax rate exceeds the average tax rate.

D.

Which of the following explains the difference between the average tax rate and the marginal tax​ rate? A. The average tax rate refers to the last dollar earned while the marginal tax rate uses total income. B. The average tax rate refers to the first dollar earned while the marginal tax rate uses total income. C. The average tax rate uses total income while the marginal tax rate refers to the tax rate of the first dollar earned. D. The average tax rate uses total income while the marginal tax rate refers to the tax rate of the last dollar earned.

D.

Which of the following is an example of a transfer in kinda transfer in kind​? A. Unemployment insurance benefitsUnemployment insurance benefits. B. Social SecuritySocial Security. C. Disability benefitsDisability benefits. D. Food stamps.

D.

Which of the following is the definition of the Producer Price Index left parenthesis PPI right parenthesisProducer Price Index (PPI)​? A. Upper A broad price index measuring the changes in prices of all new goods and services producedA broad price index measuring the changes in prices of all new goods and services produced. B. Upper A statistical measure of average prices using annually updated weights based on surveys of consumer spendingA statistical measure of average prices using annually updated weights based on surveys of consumer spending. C. Upper A weighted average of prices of a market basket of goods and services purchased by typical urban consumersA weighted average of prices of a market basket of goods and services purchased by typical urban consumers. D. Upper A statistical measure of a weighted average of prices of goods and services that firms produce and sellA statistical measure of a weighted average of prices of goods and services that firms produce and sell.

D.

Subsidizing medical services through Medicare A. makes medical services available to a large percentage of the​ population, who otherwise could not afford them. B. drives a wedge between the price received by providers and the price perceived by consumers. C. is a relatively low percentage of U.S. GDP compared to other nations. D. All of the above are true. E. Only A and B are true.

E.