Macroeconomics Test 5: Chap 7.5

An example of a major technological innovation that could have caused major economic fluctuations is A. steam power. B. computers. C. electricity. D. all of the above.

D. all of the above.

When the economy operates at full​ employment, an increase in government spending must crowd out consumption

False

A tax on labor shifts the labor ??? curve to the ??? and leads to ??? wages and ??? employment. If the supply curve for labor is​ vertical, wages ??? and employment ???

demand, left, lower, lower, fall, is constant

In an open​ economy, increases in government spending can crowd out​ consumption, investment, or ???

net exports

Countries divide GDP among its four components in very similar ways. A. True B. False

B. False

The increase of​ investment, or other component of​ GDP, caused by a decrease in government spending is called A. contraction. B. crowding in. C. the multiplier effect. D. crowding out.

B. crowding in.

Consumption or Investment Crowding​ Out? Suppose local governments in suburban communities around the country started building large community swimming pools. Identify what type of spending this might crowd​ out, and compare this to the effect of government spending on exploration of Mars. A. Government spending on large community swimming pools crowds out business​ investment, whereas government spending on exploration of Mars does not crowd out any spending. B. Both crowd out business investment. C. Government spending on large community swimming pools crowds out consumption and​ investment, whereas government spending on exploration of Mars crowds out only private investment. D. Government spending on large community swimming pools crowds out​ consumption, whereas government spending on exploration of Mars crowds out private investment.

A. Government spending on large community swimming pools crowds out business​ investment, whereas government spending on exploration of Mars does not crowd out any spending.

Tax Revenue and Labor Supply. Tax revenue collected from a payroll tax equals the tax rate times the earnings of individuals subject to the payroll tax. ​ Let's say the​ labor-supply curve is close to vertical. Explain why raising payroll tax rates will increase the total revenue the government receives from the tax. A. The tax will have little effect on employment. B. The tax will increase wages. C. The tax will increase productivity. D. Both a and b.

A. The tax will have little effect on employment.

Could Raising Capital Gains Taxes Reduce​ Revenues? The U.S. government currently taxes increases in the value of stocks when they are sold. This is called the capital gains tax. If the government significantly increased the tax rate on capital​ gains, it could actually receive less total revenue because people will... A. avoid stock​ sales, lowering this source of revenue. B. buy less stock and their income will fall. C. sell more stock and their income will fall. D. work less and pay less in taxes. Which of the following statements is​ true? A. Tax revenue is the proportion of an asset that is subject to tax and the tax rate is the value of the asset divided by income. B. The tax rate is the proportion of an asset that is subject to tax and tax revenue is the tax rate times the value of the asset. C. The tax rate is the overall value of an asset that is subject to tax and tax revenue is the tax rate times the value of the asset. D. The tax rate is the overall investment that is subject to tax and tax revenue is the tax rate times the value of the asset.

A. avoid stock​ sales, lowering this source of revenue. B. The tax rate is the proportion of an asset that is subject to tax and tax revenue is the tax rate times the value of the asset.