econ practice quiz #7

Expansionary fiscal policy can best be described as: (SLO)

A decrease in taxes and an increase in spending

describes the relationship between income earners, and income tax payers in the United States?

A. A relatively small percentage of American income earners earn a very large percentage of the nation's income B. A relatively small percentage of American income earners pay a very large percentage of the nation's federal income tax C. The bottom half of American income earners collectively earn less than 20% of the nation's income D. About half of American income earners pay little or no federal income tax.

describe the Social Security tax structure in the United States?

A. Proportional for most income earners because of the cap on income subject to social security taxes B. Regressive when the incomes of high income earners are taken into consideration

taxes is considered to be regressive by economists?

A. a sales tax that is a percentage of the price of goods consumed (say 8.25% of purchases)

Over most of the post-war (WWII) period, which statement best describes the change(s) in defense spending in the United States.

Defense spending increases in dollar terms during war years, but in general has declined as a percentage of the economy (GDP).

the income tax structure in the United States at the federal level?

Income taxes are progressive. As a person's income goes up the percentage of income they pay in taxes goes up.

Which of the following tends to make the size of a shift in aggregate demand resulting from a tax cut smaller than it otherwise would be?

The crowding-out effect

government budget deficit?

The situation that exists when the government collects LESS in taxes than it spends

Debt rollover can best be described as

Using your MasterCard to pay your Visa

Which of the following policies would be advocated by proponents of stabilization policy when the economy is experiencing severe unemployment?

a reduction in tax rates

Imagine that the government increases its spending by $75 billion. Which of the following by itself would tend to make the change in aggregate demand different from $75 billion?

both the multiplier effect and the crowding-out effect

if taxes were to incease

increase ,then consumption decreases ,and aggregate demand shifts leftward.

Supply-side economists will most likely believe that a reduction in the tax rate

shifts the aggregate supply curve to the right.

best describes how education is financed in the United States?

state and local governments pay the lions share (over 75%)

In 2009 President Obama and Congress increased government spending. Some economists thought this increase would have little effect on output. Which of the following would make the effect of an increase in government expenditures on aggregate demand smaller?

the interest rate rises and aggregate supply is relatively steep

Supply side economists are most likely to believe in:

the laffers curve

The lag problem associated with fiscal policy is due mostly to

the political system of checks and balances that slows down the process of implementing fiscal policy.