Economics 14-17

We can say a country is following a progressive tax rate if a person is charged: $1,000 on an income of $10,000, $4,000 on an income of $50,000, and $6,000 for an income of $80,000. $1,000 on an income of $50,000, $5,000 on an income of $30,000, and $8,000 on an income of $20,000. $1,000 on an income of $20,000, $5,000 on an income of $50,000, and $20,000 on an income of $100,000. $1,000 on an income of $10,000, $2,000 on an income of $20,000, and $3,000 on an income of $30,000.

$1,000 on an income of $20,000, $5,000 on an income of $50,000, and $20,000 on an income of $100,000.

Automatic stabilizers tend to "lean against the prevailing wind" of the business cycle because: wages are controlled by the minimum wage law. the spending and tax multiplier are constant. federal expenditures and tax revenues change as the level of real GDP changes. special interests influence government spending and tax revenue legislation.

federal expenditures and tax revenues change as the level of real GDP changes.

Expansionary fiscal policy occurs when the government: decreases its spending and increases its tax revenues. increases its spending or decreases its tax revenues. increases its spending or increases its tax revenues. decreases its spending or reduces its tax revenues.

increases its spending or decreases its tax revenues.

Automatic government expenditure stabilizers are _____. inversely related to changes in the level of real gross domestic product directly related to changes in the price level directly related to changes in the level of real gross domestic product inversely related to changes in the price level

inversely related to changes in the level of real gross domestic product

The national debt is unlikely to cause national bankruptcy because the: interest on the public debt equals GDP. federal government cannot repudiate the outstanding national debt. national debt can be refinanced by issuing new bonds. national debt cannot be shifted to future generations for repayment.

national debt can be refinanced by issuing new bonds.

The sum of past federal budget deficits is the: trade debt plus GDP. Congressional debt. GDP debt. national debt.

national debt.

The second largest source of federal government revenue is: corporate income taxes. social insurance taxes. personal income taxes. property taxes.

social insurance taxes.

The concurrent problems of inflation and unemployment is termed:

stagflation

Supply-side fiscal policies emphasize government policies that: ensure a reduction in budget deficit through increases in supply of money. stimulate aggregate supply to achieve long-run growth in output. ensure an increase in budget surplus through increases in supply of money. stimulate aggregate supply to smooth out business cycles.

stimulate aggregate supply to achieve long-run growth in output

The national debt is best described as the: value of all U. S. Treasury bonds owned by foreigners. percentage of GDP needed to finance a country's investment. amount by which this year's federal spending exceeds its taxes. sum of all federal budget deficits, past and present.

sum of all federal budget deficits, past and present.

The classical aggregate supply curve denotes the view:

supply creates its own demand.

An increase in regulation will shift the aggregate:

supply curve leftward.

Lower taxes and decreased government regulation are the policy recommendations of _____. monetary economics supply-side economics Keynesian economists classical economists

supply-side economics

Reducing government subsidies is an example of _____. nondiscretionary fiscal policy monetary policy automatic stabilization policy supply-side policy

supply-side policy

If the Social Security trust fund is running a: deficit, it reduces the size of the budget deficit. surplus, it reduces the size of the budget deficit. deficit, it increases the size of the budget surplus. surplus, it increases the size of the budget deficit.

surplus, it reduces the size of the budget deficit.

If an increase in the national debt reduces private consumption, a likely effect will be that: the aggregate supply curve will shift rightward. the aggregate demand curve becomes vertical. the aggregate supply curve will shift leftward. the aggregate demand curve will not shift.

the aggregate demand curve will not shift.

Increase in government spending, decrease in taxes, and increase in government spending and taxes equally is what fiscal policy?

Expansionary

A rise in the price level reduces the:

purchasing power of money.

Which of the following is true of the relationship between national debt and budget deficit? A budget deficit make the national debt zero. A budget deficit is always twice the size of the national debt. A budget deficit will increase the national debt. A budget deficit will first lower the national debt and then increase it.

A budget deficit will increase the national debt.

Which of the following would not be expected to shift the aggregate demand curve? A fall in net exports An increase in government spending A change in the price level A decrease in consumption spending

A change in price level

_____ causes a rightward shift of the aggregate supply curve. The real balance effect The net exports effect A higher tax on business A lower tax on business

A lower tax on business

_____ is an example of an automatic stabilizer. A transfer payment Infrastructure spending Foreign investment Defense expenditure

A transfer payment

"He who pays a tax should receive the benefit from the expenditure financed by the tax." This statement reflects which of the following principles for a tax? Benefits received Inexperience to collect Fairness of contribution Ability to pay

Benefits received

Those who benefit from government expenditures should pay the taxes that finance their benefits. Ex: Gas Tax

Benefits received principle

Those who have a higher income pay higher taxes

Ability to pay principle

It shows the total amount of goods and services purchased in an economy at various price levels.

Aggregate demand curve

_____ if consumers become more optimistic about the future.

Aggregate demand will increase

Shows level of real gdp produced at different possible price levels during a time period. Also known as total dollar amount of goods and services produced

Aggregate supply curve

_____ is a likely cause of stagflation. An increase in the price of imported oil A high rate of taxation An increase in government spending An increase in money supply

An increase in the price of imported oil

Federal expenditures and tax revenues that automatically changes levels in order to stabilize an economic expansion or contraction

Automatic stabilizers

Occurs when government expenditures exceed government revenues.

Budget deficit

What is the third step of the budgetary process?

Budget is passed in October

What is the second step of the budgetary process?

Budget resolution, congress sets target levels in May

Occurs when government revenues exceed government expenditures

Budget surplus

Aggregate demand equals

C+I+G+ (X-M)

Believes economy will naturally readjust to a recession and inflation therefore no need for government intervention

Classical range

Non price level determinants of AD

Consumption, investment, government spending, and net exports which shift aggregate demand curve

Decrease in government spending, increase in taxes, and a decrease in government spending and taxes equally is what fiscal policy?

Contractionary

Rise in price level resulting from decrease in aggregate supply curve while aggregate demand curve remains fixed

Cost-push inflation

Another expansionary fiscal policy intended to increase aggregate demand and to achieve full employment calls for the government to ______ taxes

Cut

Which of the following taxes charged by the federal government reflects the benefits received principle of taxation? Excise taxes on gasoline A tax on the value added to a commodity Corporate income tax Personal income tax

Excise taxes on gasoline

A recession causes a _________ in taxes

Decrease

In Keynesian range when aggregate demand increases unemployment _________

Decreases

What happens to economic growth when aggregate supply increases?

Decreases

What happens to inflation when aggregate supply increases?

Decreases

What happens to unemployment when aggregate demand increases?

Decreases

What happens to unemployment when aggregate supply increases?

Decreases

When aggregate demand decreases, employment __________

Decreases

When aggregate demand decreases, price level __________

Decreases

Spending exceeds tax revenue

Deficit

Rise in price level resulting from increase in aggregate demand curve while aggregate supply curve remains fixed

Demand pull inflation

Aggregate _____________ curve shows level of ______________ purchased by households, businesses, and foreigners

Demand; real GDP

Deliberate use of changes in government spending or taxes to alter aggregate demand and stabilize the economy

Discretionary fiscal policy

natural rate of unemployment

Full employment

Classical range represents an economy at __________

Full employment output

The intermediate range represents an economy approaching __________

Full employment output

Federal, state, and local government outlays for goods and services, including transfer payments

Government expenditures

Government purchases + transfer payments =

Government expenditures

_____ in a balanced budget. Net exports are zero Government revenues equal government expenditures Public spending is zero Aggregate demand equals real income level

Government revenues equal government expenditures

Which of the following is true in the case of a budget surplus? Value of imports and exports are equal Value of imports exceed the value of exports Government revenues exceed government expenditures Government expenditures exceed government revenues

Government revenues exceed government expenditures

In Keynesian range, aggregate supply is ___________

Horizontal

The largest federal government expenditure is on: foreign aid. national defense. the interest expense of the national debt. income security.

Income security

Which of the following categories has accounted for the largest percentage of total federal government expenditures in the recent past? Education and health Income security Interest on the national debt National defense

Income security

In intermediate range increases in aggregate demand there is an _____________ in both price level and real GDP

Increase

Recession causes an _____ in government spending and people on unemployment insurance

Increase

Budget surplus ______ Real gdp

Increases

In Keynesian range when aggregate demand increases employment _________

Increases

In classical range when aggregate demand increases, price level _______

Increases

Inflation ________ taxes

Increases

The aggregate demand curve will shift to the right if government spending

Increases

What happens to economic growth when aggregate demand increases?

Increases

What happens to employment when aggregate demand increases?

Increases

What happens to employment when aggregate supply increases?

Increases

What happens to inflation when aggregate demand increases?

Increases

When aggregate demand decreases, unemployment ___________

Increases

When the economy expands what happens to the interest rate?

Increases

From which of the following taxes does the U.S. government receive the greatest percentage of total federal government tax revenues? Social Security taxes Individual income taxes Excise taxes Corporate income taxes

Individual income taxes

In classical range once economy reaches full employment output, increases in aggregate demand causes _______

Inflation

In the classical range, an increase in aggregate demand causes:

Inflation

Aggregate demand is an _________ relationship between price and quantity

Inverse

Believes economy will self adjust in the long run but adjustments may take a long time therefore the government can intervene

Keynesian Range

A decline in the level of investment will shift the aggregate demand curve to the

Left

Which of the following is a belief of classical theory? Inflexible wages Inflexible prices Demand creates its own supply Long-run full employment

Long-run full employment

Downward slope of aggregate demand shows that at a given level of aggregate income, people buy ________ goods and services at a _________ average price level

More; lower

Accepts your money and then buys stocks for your convenience. Ex: insurance companies

Mutual fund

The federal budget process begins when federal agencies submit their budget requests to the: Council of Economic Advisors (CEA). Office of Management and Budget (OMB). Congressional Budget Office (CBO). Department of Commerce (DOC).

Office of Management and Budget (OMB).

Along the Keynesian range of the aggregate supply curve, a decrease in aggregate demand will decrease: only the price level. only real GDP. both the price level and real GDP. real GDP and increase the price level.

Only real gdp

What is the first step of the budgetary process?

President submits budget in February

Jose pays a tax of $24,000 on his income of $60,000, while Richard pays a tax of $3,000 on his income of $30,000. This tax is: proportional. an indirect tax. regressive. progressive.

Progressive

Sharon pays a tax of $4,000 on her income of $40,000, while Brad pays a tax of $1,000 on his income of $20,000. This tax is: proportional. regressive. an indirect tax. progressive.

Progressive

Charges higher percentage the more money you earn

Progressive tax

Charges same percentage regardless of income. Ex: Illinois tax rate

Proportional tax

The appropriate discretionary policy to use in an economy which is on the classical range of the aggregate supply curve and experiencing inflation is to _____. raise taxes reduce government spending increase money supply lower taxes

Raise taxes

Which of the following is true in the horizontal segment of the aggregate supply curve? Employment can increase only if the general price level increases. Real GDP of an economy can increase only with a corresponding increase in the price level. Real GDP of an economy can increase without any increase in the price level. Employment can increase only if the general price level decreases.

Real GDP of an economy can increase without any increase in the price level.

Keynesian economists recommends fiscal policy to fight _____. recession overproduction demand-pull inflation cost-push inflation

Recession

Charges lower percentage as income rises. Ex: sales tax, tax on the poor, lottery tickets

Regressive tax

In Keynesian range as aggregate demand increases, the price level _________ as real gdp ____________

Remains constant; expands

Nonprice level determinants of AS that affect production costs (5)

Resource prices, technological change, taxes, subsidies, regulations

Lower production costs shifts aggregate supply to the

Right

A _____ will shift the aggregate demand curve rightward. fall in government spending rise in the personal tax rise in net exports fall in investment

Rise in net exports

The Keynesian range represents economy in a ____________

Severe recession

Short run benefits, long run costs

Shortsightedness Effect

Occurs when economy experiences high unemployment and rapid inflation simultaneously

Stagflation

In Keynesian range when aggregate demand increases price level _________

Stays the same

In classical range when aggregate demand increases, employment _______

Stays the same

Which of the following favors government policies to stimulate an economy by creating incentives for individuals and businesses to increase their productive efforts? Keynesian economics Marxian economics Supply side economics Monetarist economics

Supply side economics

Emphasizes government policies that increase aggregate supply in order to achieve long run growth in real output, full employment, and a lower price level

Supply side fiscal policy

Tax revenue exceeds spending creates a

Surplus

To finance the difference between government expenditures and revenues, the United States Treasury borrows by selling: shares of private corporations. T-bills, notes, and bonds. its gold reserves. government bonds to foreign governments.

T-bills, notes, and bonds.

Any payment to the government

Tax

A(n) _____ is likely to cause an increase in aggregate demand.

Tax cut

Which of the following examples follow the ability-to-pay principle of taxation? The average tax rate for a person who earns $10,000 is 15% and the average tax rate for a person who earns $15,000 is 10%. The average tax rate for a person who earns $20,000 is 5% and the average tax rate for a person who earns $40,000 is 5%. The average tax rate for a person who earns $21,000 is 15% and the average tax rate for a person who earns $50,000 is 15%. The average tax rate for a person who earns $10,000 is 5% and the average tax rate for a person who earns $50,000 is 10%.

The average tax rate for a person who earns $10,000 is 5% and the average tax rate for a person who earns $50,000 is 10%.

Identify the main focus of supply-side fiscal policy. The effect of tax cuts on labor supply The effect of net exports on aggregate expenditures The effect of automatic stabilizers on budget deficits The effect of government spending on aggregate expenditures

The effect of tax cuts on labor supply

Which of the following is likely to be true if the fiscal year starts without a budget and Congress fails to pass a continuing resolution? The government issues new savings bonds to raise money. Elections are held to elect a new government. Congress operates on the basis of the previous year's budget. The federal government shuts down.

The federal government shuts down.

According to supply-side policy, which of the following is true if there is a reduction in the tax rates on wages? The labor supply curve shifts leftward and the equilibrium wage rate decreases. The labor supply curve shifts rightward and the equilibrium wage rate decreases. The labor supply curve shifts leftward and the equilibrium wage rate increases. The labor supply curve shifts rightward and the equilibrium wage rate increases.

The labor supply curve shifts rightward and the equilibrium wage rate decreases.

Which of the following is a difference between the national debt and budget deficit? The national debt is the total amount owed by the federal government to foreign governments, while the budget deficit is the cumulative effect of all past budget deficits incurred by the government. The national debt is the total amount owed by the federal government to foreign governments, while the budget deficit is the excess of revenues over expenditures in a year. The national debt is the difference between government expenditures and revenues, while the budget deficit is difference between earnings from government bonds and the interest payments that have to be made by the government. The national debt is the total amount owed by the federal government to owners of government securities, while the budget deficit is the excess of expenditures over revenues in a year.

The national debt is the total amount owed by the federal government to owners of government securities, while the budget deficit is the excess of expenditures over revenues in a year.

Identify an example of a progressive tax in the United States. The excise tax The personal income tax The customs duty The property tax

The personal income tax

In the intermediate range of the aggregate supply curve, if government expenditures increase causing the aggregate demand curve to shift outward, which of the following is most likely to occur? The price level and real GDP will both rise. The price level will not change, but real GDP will increase. The price level will rise, but real GDP will not change. Both the price level and real GDP will not change.

The price level and real GDP will both rise.

Identify the correct statement about unemployment compensation payments. These payments increase during recession and increase the budget deficit. These payments decrease during recession and increase the budget deficit. These payments increase during recession and increase the budget surplus. These payments decrease during recession and decrease the budget surplus.

These payments increase during recession and increase the budget deficit.

Suppose that society had been using a progressive income tax, but shifted to a proportional or true flat tax. If total tax revenues to government were the same under the two plans, who would be made better off and who would be made worse off? Those with low incomes would be made better off, and those with high incomes would be made worse off. People at all income levels would be better off. People at all income levels would be worse off. Those with low incomes would be made worse off, and those with high incomes would be made better off.

Those with low incomes would be made worse off, and those with high incomes would be made better off.

In classical range, aggregate supply is __________

Vertical

The national debt is reduced if there is: a budget deficit. demand-pull inflation. a budget surplus. cost-push inflation.

a budget surplus.

Amanda and Caroline are residents of Genovia. Amanda earns an income of $25,000 per year and pays $3,000 as tax, and Caroline earns $95,000 per year and pays $10,000 as tax. We can conclude that Genovia follows: the benefits-received principle of taxation. a progressive tax rate. a proportional tax rate. a regressive tax rate.

a regressive tax rate. Feedback: Incorrect. The average tax rate faced by Amanda is $3,000 ÷ $25,000 = 12 percent. The average tax rate faced by Caroline is $10,000 ÷ $95,000 = 10.5 percent.

The _____ of taxation is the concept that those who have higher incomes should pay a greater proportion of their income in taxes, regardless of benefits received. absolute advantage ability-to-pay principle fairness of contribution principle benefits-received principle

ability-to-pay principle

The Congressional Budget Office performs the important task of: ratifying the budget passed by Congress. submitting the budget to the President. formulating policies to reduce the budget deficit. advising Congress on the budget.

advising Congress on the budget.

Medicaid is a part of a(n) _____. supply-side policy expansionary policy contractionary policy automatic stabilizer

automatic stabilizer

An amusement park in the city of Baltonia charges an entry fee of $50. The funds generated by collecting the entry fee is used to maintain the park and the rides in the park. The entry fee charged by the park is an example of: ability-to-pay principle. benefits-received principle. a value-added tax. a flat tax rate.

benefits-received principle.

Suppose workers become pessimistic about their future employment, which causes them to save more and spend less. If an economy is on the intermediate range of the aggregate supply curve, then: both real GDP and the price level will fall. real GDP will fall and the price level will rise. real GDP will rise and the price level will fall. both real GDP and the price level will rise.

both real GDP and the price level will fall.

If an economy enters a recession, automatic stabilizers create _____. budget deficits inflationary gaps budget surpluses recessionary gaps

budget deficits

Automatic stabilizers will increase the: budget surplus during an economic expansion. budget deficit during an economic expansion. budget surplus during a recession. budget deficit during periods of high inflation.

budget surplus during an economic expansion.

Supply-side fiscal policy would cause a change in real gross domestic product through a(n) _____. increase in government spending change in net exports increase in transfer payments change in resource prices

change in resource prices

Discretionary fiscal policy involves: changes in government spending and taxes as a result of legislation. changes in money supply as a result of legislation. automatic changes in federal expenditures to control inflation. automatic changes in tax revenues to control inflation.

changes in government spending and taxes as a result of legislation

According to supply-side economists: larger the marginal propensity to consume, larger the size of the spending multiplier. changes in tax rates affect the incentive to work, save, and invest. smaller the marginal propensity to consume, smaller the size of the spending multiplier. changes in disposable income works through the tax multiplier to increase aggregate demand.

changes in tax rates affect the incentive to work, save, and invest.

Fiscal policy is concerned with: regulation of net exports. expanding and contracting the money supply. encouraging businesses to invest. changing government spending and/or tax revenues.

changing government spending and/or tax revenues.

If Congress fails to pass a budget before the fiscal year starts, then federal agencies may continue to operate only if Congress has passed a: deficit reduction plan. continuing resolution. balanced budget amendment. tax increase.

continuing resolution.

Decreasing government spending or increasing taxes to influence aggregate demand is a part of: contractionary monetary policy. contractionary fiscal policy. expansionary monetary policy. expansionary fiscal policy.

contractionary fiscal policy.

In the figure given below, a shift of the aggregate supply curve from AS1 to AS2 a rightward shift can result from a: decrease in taxes as well as subsidies. decrease in resource prices and technological advances. decrease in taxes and increase in government regulations. decrease in resource prices and increase in subsidies.

decrease in resource prices and technological advances.

Budget deficit ________ Real GDP

decreases

An increase in total spending causes: stagflation. deflation. demand-pull inflation. cost-push inflation.

demand-pull inflation.

Suppose a person is taxed $5,000 on an income of $50,000, taxed $3,500 on an income of $35,000, and taxed $6,500 on an income of $65,000. The person is charged a(n): flat tax. regressive tax. excise tax. progressive tax.

flat tax.

Automatic stabilizers are: effective only when an economy is in a recessionary phase. government expenditures and tax revenues that change on their own and thereby stabilize an economy. effective only when an economy is in an inflationary phase. deliberate changes in government spending and tax revenues to alter aggregate demand.

government expenditures and tax revenues that change on their own and thereby stabilize an economy.

Critics of Keynesian fiscal policy believe that: a decrease in the tax rate will lead to a large increase in aggregate demand through the operation of the tax multiplier. government spending financed by borrowing has little effect on the growth of real gross domestic product. an increase in government spending will lead to a large increase in real gross domestic product through the operation of the spending multiplier. government spending financed by borrowing causes an increase in aggregate demand and real gross domestic product.

government spending financed by borrowing has little effect on the growth of real gross domestic product.

Legislation in Fordica defines a fair tax system as a one under which those with the highest incomes should pay a greater proportion of their income in taxes. In order to keep the tax system fair, the government in Fordica should: implement a progressive tax rate. implement a regressive tax rate. charge a uniform tax rate to all income groups. not levy a tax on individual incomes.

implement a progressive tax rate.

An increase in aggregate demand will increase only real gross domestic product: in the Keynesian range of the aggregate supply curve. in the Classical range of the aggregate supply curve. during demand-pull inflation. during cost-push inflation.

in the Keynesian range of the aggregate supply curve.

Expenditures on federal retirement and disability benefit is part of the _____ program of the federal government. unemployment national defense income security education and health

income security

With regard to the national debt, the federal government owes money to the _____. federal government workers investors who buy U.S. Treasury bills, bonds, and notes taxpayers Treasurer of the United States

investors who buy U.S. Treasury bills, bonds, and notes

A progressive tax system can be defined as a tax that: is levied at a higher percentage of income as income rises. is levied at a lower percentage of income as income rises. is levied on the value added to a commodity or a service. is levied at the same percentage of income, regardless of the size of income.

is levied at a higher percentage of income as income rises.

The portion of the national debt that _____ is the external national debt. is owed to residents living abroad does not carry any interest obligations need not the repaid is owed to foreign citizens

is owed to foreign citizens

In the aggregate demand-supply model, cost-push inflation is graphically denoted by a: leftward shift of the aggregate supply curve while the aggregate demand curve remains fixed. rightward shift of the aggregate supply curve while the aggregate demand curve remains fixed. rightward shift of the aggregate demand curve while the aggregate supply curve remains fixed. leftward shift of the aggregate demand curve while the aggregate supply curve remains fixed.

leftward shift of the aggregate supply curve while the aggregate demand curve remains fixed.

The aggregate supply curve shows the _____.

level of real GDP produced at different price levels during a time period, ceteris paribus

A proportional tax is a tax that: levies a tax as a higher percentage of income as income rises. levies the same tax as a percentage income, regardless of the size of income. levies a tax on the income of corporations and not that of individuals. levies a tax as a lower percentage of income as income rises.

levies the same tax as a percentage income, regardless of the size of income.

The aggregate demand curve is downward sloping indicating

people buy more goods and services at a lower average price level.

The government of the United States can pay off the national debt by: seeking debt forgiveness from its creditors. selling its gold reserves. printing money. selling land owned by the government.

printing money.

According to supply-side economists, a higher corporate profit tax will: create demand-pull inflation. reduce investment and the real gross domestic product. create hyperinflation. help to achieve the full employment level of real gross domestic product.

reduce investment and the real gross domestic product.

A decrease in government spending can be an appropriate policy to: increase the consumer price index in an economy. increase Real GDP. reduce the consumer price index in an economy. generate employment in an economy.

reduce the consumer price index in an economy.

If the Social Security trust fund collects more taxes than it pays in retirement benefits, it: reduces the financial assets with foreign banks. increases the budget deficit of the federal government. increases the financial assets with foreign banks. reduces the budget deficit of the federal government.

reduces the budget deficit of the federal government.

During a recession, supply-side economics would advocate a(n): reduction in the total imports of a country. increase in government expenditure. reduction in government regulations on businesses. increase in investment spending.

reduction in government regulations on businesses.

The supply-side effect of a tax cut is a(n) _____. increase in unemployment and inflation, while the Keynesian demand-side effect is a reduction in both inflation and unemployment reduction in unemployment and inflation, and the Keynesian demand-side effect is also the same increase in inflation and a reduction in unemployment, while the Keynesian demand-side effect is a reduction in both inflation and unemployment reduction in unemployment and inflation, while the Keynesian demand-side effect is a reduction in unemployment but an increase in inflation

reduction in unemployment and inflation, while the Keynesian demand-side effect is a reduction in unemployment but an increase in inflation

Consider a hypothetical example in which a person's income serves only two purpose, either paid as taxes or saved. Kimberly earns an income of $10,000 and saves an amount of $9,000. Suppose her income increases from $10,000 to $50,000. She now saves an amount of $46,000. We can say that Kimberly is facing a _____.

regressive tax rate, The average tax rate when her income was $10,000 is = $1,000 ÷ $10,000 = $10%. The average tax rate when her income increases from $10,000 to $50,000 = $4,000 ÷ $50,000 = 8%.

A tax is structured so that the tax as a percentage of income declines as the level of income increases is called a(n): progressive tax. flat tax. excise tax. regressive tax.

regressive tax.

When the federal government refinances its debts, it: prints money. increases its tax collections through new taxes levied by Congress. replaces old bonds with new ones. collects tax revenues from citizens and pays the bond holders.

replaces old bonds with new ones.

A technological improvement will result in a:

rightward shift of the aggregate supply curve.

It has been observed that income tax collections: decline during an economic contraction and, ceteris paribus, reduce budget deficits. rise during an economic expansion and, ceteris paribus, reduce budget deficits. decline during an economic expansion and, ceteris paribus, increase budget deficits. rise during an economic contraction and, ceteris paribus, increase budget deficits.

rise during an economic expansion and, ceteris paribus, reduce budget deficits.

In the intermediate range of the aggregate supply curve: the price level can vary but the level of real GDP remains constant. the price level and the level of real GDP vary as an economy approaches full employment. the price level is constant for an economy in recession. an economy is at full-employment level and does not deviate from this position.

the price level and the level of real GDP vary as an economy approaches full employment.

Suppose politicians in Fordica favor a program that provides immediate benefits but have hidden future costs. We can say that the politicians' decision is a result of: bureaucratic inefficiency. rational ignorance. the special-interest group effect. the shortsightedness effect.

the shortsightedness effect.

According to the classical theory, a decrease in aggregate demand will result in: a permanent new equilibrium point where the output level is larger than the full-employment level of real GDP. unemployment and a surplus of goods and services but price and wage rigidity does not allow changes in prices and wages. unemployment and a surplus of goods and services causing price and wage cuts. a permanent new equilibrium point where the output level is lesser than the full-employment level of real GDP.

unemployment and a surplus of goods and services causing price and wage cuts.

The pre-Keynesian or classical economic theory viewed the long-run aggregate supply curve for the economy to be: positively sloped at the full-employment level of real GDP. horizontal at the full-employment level of real GDP. vertical at the full-employment level of real GDP. backward bending at the full-employment level of real GDP.

vertical at the full-employment level of real GDP.

Unemployment compensation is a nondiscretionary fiscal policy because: when an economy expands, the amount of unemployment compensation is deliberately changed by the government to maintain a balanced budget. the amount of unemployment compensation handed out by the government varies from year to year. the government can use it to correct a budget deficit. when an economy expands, unemployment falls, and government spending on unemployment compensation decreases.

when an economy expands, unemployment falls, and government spending on unemployment compensation decreases.