Econ Chapter 13 Homework

Which of the following are NOT major components of US federal government spending? - Community and regional development - Interest payments - Social Security - National Defense

Community and regional development

The country of Latinivia has a goal to increase and foster economic activity and therefore increase Aggregate Demand. What actions would it take to achieve this goal? > Increase taxes on corporations. > Cut funding to research and development > Fund new infrastructure projects by passing a new spending bill. > Cut funding to government departments to minimize the budget deficit.

Fund new infrastructure projects by passing a new spending bill.

How would Keynesian and Classical economics propose dealing with a recession? > Both would suggest an increase in aggregate demand by increasing government spending. > They would both suggest tax increase to counterbalance each other. > Keynesians would suggest increasing government spending, while neoclassicals would suggest tax increases that stimulate productivity growth and labor demand. > Keynesians would suggest an increase government spending, while neoclassicals would suggest doing nothing because the labor market will correct itself.

Keynesians would suggest an increase government spending, while neoclassicals would suggest doing nothing because the labor market will correct itself.

Which of the following example(s) describe a regressive tax? > State income tax with a 10% tax rate on low income households and 15% tax rates on higher income households. > Income tax with a 10% tax rate on low income households and 20-30% tax rates on higher income households. > Medicare payroll tax of 2.9% of income for everyone, regardless of how much they earn. > Social Security tax rate of 6.2% on earned income below $117,000 and 0% on income earned above $117,000.

Social Security tax rate of 6.2% on earned income below $117,000 and 0% on income earned above $117,000.

Which of the following is an example of an automatic fiscal policy stabilizer? > Tax revenues rise after Congress raises corporate tax rates. > Congress decides to cut spending on national defense. > Tax revenues fall as real GDP decreases. > Congress cuts individual income tax rates.

Tax revenues fall as real GDP decreases.

Assume that the government of country of Ostentia for its current budget plans to collect taxes in the amount of $10 billion and to spend $9 billion. A civil war breaks out and the government spends an additional $1 billion and tax collection is down by $1 billion. What is the result? > The expected budget surplus turns in to a $1 billion deficit. > The budget is now balanced. > The expected budget surplus turns in to a $2 billion deficit. > The expected budget deficit turns in to a $1 billion surplus.

The expected budget surplus turns in to a $1 billion deficit.

Assuming that income tax is the only source of revenue for the government, with tax revenue of $50 billion and government spending totaling $70 billion, which of the following is true of the government's budget? > The government has a budget surplus of $20 billion. > The government has a budget deficit of $20 billion. > The government has a balanced budget of $70 billion. > The government has a budget deficit of $120 billion.

The government has a budget deficit of $20 billion.

Tom earns $33,000 per year. The income tax rate on incomes below $20,000 is 10 percent. The rate on income between $20,001 and $35,000 is 15 percent. Which of the following is true? > Tom's marginal income tax rate is 12.5 percent. > The income tax is flat. > Tom's marginal income tax rate is 15 percent. > The income tax is regressive.

Tom's marginal income tax rate is 15 percent.

A ________ is created each time the federal government spends more than it collects in taxes in a given year. > lower federal debt > budget surplus. > regressive tax. > budget deficit

budget deficit

An expansionary fiscal policy can increase the level of aggregate demand by all of the following EXCEPT > government policies to facilitate US exports to other nations. > cutting tax rates to increase disposable income and spending. > reducing corporate tax rates to increase investment spending. > decreasing government purchases.

decreasing government purchases.

If a government reduces tax rates in order to increase the level of aggregate demand, what type of fiscal policy is being used? > automatic and expansionary. > contractionary and automatic. > discretionary and expansionary > expansionary and contractionary.

discretionary and expansionary

When the government increases its spending, it is conducting > monetary policy. > supply-side policy. > fiscal policy. > trade policy

fiscal policy.

A major concern of fiscal policy is - how changes to the money supply affect aggregate demand. - how federal government taxing and spending affects aggregate demand. - how changes to the budget affect the money supply. - controlling international trade balances

how federal government taxing and spending affects aggregate demand.

The main reason that fiscal policy has lags is that > it needs legislative approval. > it needs approval by the Fed. > it changes due to interest rates. > it is due to the monetary fund.

it needs legislative approval.

A decrease in taxes will shift the AD curve to the ________, while a decrease in government expenditure will shift the curve to the ________. > left; left. > right; right > left; right. > right; left

right; left

An implementation policy lag describes the length of time it > takes funds to be dispersed to government agencies. > takes before policy makers recognize that a recession or expansion is occurring. > takes for the new policy to play out. > takes to enact a monetary or fiscal policy.

takes to enact a monetary or fiscal policy.

When inflation begins to climb to unacceptable levels in the economy, the government should > use expansionary fiscal policy to shift aggregate demand to the left. > use contractionary fiscal policy to shift aggregate demand to the left. > use contractionary fiscal policy to shift aggregate demand to the right. > use expansionary fiscal policy to shift aggregate demand to the right.

use contractionary fiscal policy to shift aggregate demand to the left.