ECO 302 Week 8 Quiz - Strayer
Click on The Link Below to Purchase A+ Graded Course
Material
http://hwgala.com/ECO-302-Week-8-Quiz-Strayer-355.htm
Chapter 12 and 13
Chapter 12
TRUE/FALSE
1.Government can use its funds to purchase goods or transfer
money to people.
2.If a households transfer payment less taxes is greater than
zero, then government is a net source of funds for that
household.
3.A permanent increase in government purchases causes an
increase in the real rate of interest.
4.A permanent increase in government purchases increases
GDP.
5.A temporary increase in government purchases increases
GDP.
6.A temporary increase in government expenditures will reduce
gross investment.
7.From 1929 to the present, government expenditures as a ratio
to GDP have risen to equal about one-third.
8.U.S. government transfer payments in the form of unemployment
insurance are equivalent to about ten percent of GDP.
9.The largest expansions in transfer payments at the U.S.
federal level have been in Social Seccurity and Medicare.
10.Across a large sample of countries, the U.S. ratio of total
government expenditure to GDP is near the median.
MULTIPLE CHOICE
1.The biggest category of government purchases in the US
is:a.state and local purchases. c.federal government purchases.
b.defense purchases. d.federal transfer payments.
2.Government transfer payment as a percentage of GDP have
been:a.generally rising.c.cyclical.b.generally
falling.d.constant.
3.The fastest growing part of the federal government budget
since WWII is:a.interest payments on the debt.c.transfer
payments.b.defense spending.d.infrastructure.
4.State and local governments purchases include:a.defense
spending.c.social security retirement spending.b.education
spending.d.all of the above.
5.The biggest category of state and local expenditures
are:a.education.c.defense.b.transfer payments. d.none of the
above.
6.State and local governments purchases are about
half:a.interest on debt.c.defense.b.transfer payments. d.none of
the above.
7.The government budget constraint without borrowing is:a.Gt +
Vt = Tt + (Mt - Mt-1 )/Pc.Gt - Vt = Tt b.Gt = Tt + Vt d.Gt - Vt =
Tt - (Mt - Mt-1 )/P
8.The government budget constraint is:a.government purchases
less transfer payments equal revenue from money growth less
taxes.c.government purchases plus taxes equal transfer payment plus
revenue from money creation.b.government purchases plus transfer
payments equal taxes plus revenue from money growth.d.government
purchases times transfer payment equals taxes times revenue from
money creation.
9.The governments budget constraint is:a.Gt + Vt = Tt + (Mt -
Mt-1 )/Pc.-Gt = Vt - Tt, if revenue from money creation is
zero.b.Gt + Vt - Tt = (Mt - Mt-1 )/Pd.all of the above.
10.The governments budget is:a.government purchases plus
transfer payments equal taxes plus revenue from money
creation.c.the negative of government equals transfers less taxes,
if revenue from money creation is zero.b.government purchases plus
transfers less taxes equal revenue from money creation. d.all of
the above.
11.If there is no revenue from money growth, then the
governments budget constraint without borrowing is:a.Gt + Vt =
Tt.c.Gt = Vt - Ttb.Gt = Vt + Tt.d.all of the above.
12.If the money supply does not change, then the governments
budget constraint without borrowing is:a.Gt - Vt = Ttc.-Gt = Vt -
Tt b.Gt = Vt - Tt d.all of the above.
13.Among the governments sources of funds are;a.transfer
payments. c.government purchases. b.tax revenue.d.all of the
above.
14.Among the governments sources of funds are;a.transfer
payments. c.real revenue from printing money. b.government
purchases. d.all of the above.
15.Among the governments uses of funds are;a.transfer payments.
c.real revenue from printing money.b.tax revenue.d.all of the
above.
16.Among the governments uses of funds are;a.government
purchases.c.real revenue from printing money.b.tax revenue.d.all of
the above.
17.In the market clearing model without government borrowing,
the net effect of government on households is an increase in funds
of: a.transfer payments times taxes.c.taxes less transfer
payments.b.transfer payments plus taxes. d.transfer payments less
taxes.
18.If a households transfer payments less taxes is positive,
then the government:a.is a net source of funds for that household.
c.is a net drain on that household. b.is a net use of fund of funds
for that household. d.does not affect that households budget
constraint.
19.If a households transfer payments less taxes is negative,
then the government:a.is a net source of funds for that household.
c.is a net subsidizer of that household. b.is a net use of fund of
funds for that household. d.does not affect that households budget
constraint.
20. According to the market clearing model a permanent increase
in government purchases causes:a.a decrease in consumption.c.an
increases in real GDP. b.an increases in the real interest rate.
d.all of the above.
21.According to the market clearing model a permanent increase
in government purchases leads to:a.an increase in capital
utilization.c.an increase in the demand for capital services. b.a
decrease in the supply of capita services. d.no change in the real
rate of interest.
22.According to the market clearing model a permanent increase
in government purchases causes an increase in:a.real GDP.c.the real
wage rate.b.the real interest rate. d.none of the above.
23.In the market clearing model the intertemporal substitution
effect from a permanent increase in government purchases:a.works
through real interest rate changes. c.works through real interest
rate and real wage changes. b.works through real wage changes.
d.does not exist because the real interest rate and real wage rated
do not change.
24.In the market clearing model a permanent decrease in
government purchase will:a.increase consumption. c.increase the
real wage rate.b.increase the real interest rate.d.all of the
above.
25.In the market clearing model a permanent increase in
government purchases does not increase the real wage
because:a.labor supply and labor demand increase about the same
amount. c.labor demand is downward sloping. b.labor supply is
fixed. d.neither labor demand nor labor supply shift due to the
permanent increase in government purchases.
26.In the market clearing model a permanent increase in
government purchases does not increase the real interest rate
because:a.the supply of capital services and demand for capital
services increase about the same amount. c.the demand for capital
services is downward sloping. b.neither demand for capital services
nor supply of capital services shift due to the permanent increase
in government purchases.d.the supply of capital services is upward
sloping.
27.According to the market clearing model, a one unit permanent
increase in government purchases causes:a.GDP to rise about one
unit.c.gross investment to fall about one unit.b.consumption to
fall about one unit.d.all of the above.
28.According to the market clearing model a one unit permanent
increase in government purchases causes:a.no change in GDP.c.no
change in gross investment. b.consumption to fall about one
unit.d.all of the above.
29.US data since the end of the Korean war shows that permanent
changes in government purchases are:a.acyclical as the model
predicts. c.acyclical as opposed to the model that predicts they
will be procyclical. b.procyclical as the model predicts.
d.countercyclical as opposed to the model that predicts they will
be acyclical.
30.Since the end of the Korean war, US permanent government
spending has:a.increased as GDP has increased. c.had little
relationship to fluctuations in real GDP. b.decreased as GDP has
increased. d.decreased when GDP decreased.
31.The model predicts that a temporary increase in government
purchases causes:a.an increase in consumption.c.a reduction in
gross investment.b.a reduction in real GDP.d.all of the above.
32.The model predicts that a temporary increase in government
expenditures will lead to:a.a decrease in consumption.c.a decrease
in GDP.b.an increase in investment. d.none of the above.
33.People might work more during a war time temporary increase
in government purchases because of:a.patriotism.c.increased
investment the model predicts. b.the increase in the MPL as the
model predicts.d.all of the above.
34.People might work more during a war time temporary increase
in government purchases because of:a.a military draft or voluntary
enlistment takes away some primary household earners and to
maintain consumption as the model predicts, those households may
have other members work who did not previously.c.increased
investment leading to hire capital stocks that increase the demand
for labor as the model predicts. b.the increase in the MPL leading
to an increase in the demand for labor and increased capital
utilization as the model predicts.d.all of the above.
35.The real wage increase in the data during war time might be
overstated as:a.price controls lead to understating the price
level. c.because capital utilization falls in war time.b.labor
demand is so high in war time.d.all of the above.
36.With a temporary change in government purchases the model
predicts investment
is:a.acyclical.c.countercylical.b.procyclical.d.exogenous.
37.With a permanent change in government purchases the model
predicts consumption
is:a.acyclical.c.countercylical.b.procyclical.d.exogenous.
38.The model predicts that a temporary decrease in government
purchases causes:a.an increase in consumption.c.an increase in
gross investment.b.a reduction in real GDP.d.all of the above.
39.According to the market clearing model, a one unit temporary
decrease in government purchases causes:a.no change in GDP.c.no
change in the interest rate. b.investment to rise about one
unit.d.all of the above.
40.According to the market clearing model, a one unit temporary
decrease in government purchases causes:a.a one unit decrease in
GDP.c.consumption to rise about one unit.b.gross investment to rise
about one unit.d.all of the above.
41.The model predicts that a temporary decrease in government
expenditures will lead to:a.an increase in real wages.c.a decrease
in GDP.b.a decrease in the real interest rate.d.none of the
above.
42.The model predicts that a temporary decrease in government
purchases causes:a.an increase in consumption.c.an increase in
gross investment.b.a reduction in real GDP.d.all of the above.
43. The model predicts a permanent decrease in government
purchases causes:a.an increase consumption.c.an increases real GDP.
b.an increases the real interest rate. d.all of the above.
44.The model predicts a permanent decrease in government
purchases leads to:a.an increase in capital utilization.c.an
increase in the demand for capital services. b.a decrease in the
supply of capita services. d.no change in the real rate of
interest.
45.According to the model a permanent decrease in government
purchases does not increase the real wage according to the market
clearing model because:a.labor supply and labor demand decrease
about the same amount. c.labor demand is downward sloping. b.labor
supply is fixed. d.neither labor demand nor labor supply shift due
to the permanent increase in government purchases.
46.According to the model a permanent decrease in government
purchases does not decrease the real interest rate according to the
market clearing model because:a.the supply of capital services and
demand for capital services decrease about the same amount. c.the
demand for capital services is downward sloping. b.neither demand
for capital services nor supply of capital services shift due to
the permanent increase in government purchases.d.the supply of
capital services is upward sloping.
47.A temporary decrease in government purchases does not
increase the real wage according to the market clearing model
because:a.labor supply and labor demand decrease about the same
amount. c.labor demand is downward sloping. b.labor supply is
fixed. d.neither labor demand nor labor supply shift due to the
permanent increase in government purchases.
48.A temporary decrease in government purchases does not
decrease the real interest rate according to the market clearing
model because:a.the supply of capital services and demand for
capital services decrease about the same amount. c.the demand for
capital services is downward sloping. b.neither demand for capital
services nor supply of capital services shift due to the permanent
increase in government purchases.d.the supply of capital services
is upward sloping.
49.A temporary increase in government purchases does not
increase the real wage according to the market clearing model
because:a.labor supply and labor demand increase about the same
amount. c.labor demand is downward sloping. b.labor supply is
fixed. d.neither labor demand nor labor supply shift due to the
permanent increase in government purchases.
50.A temporary increase in government purchases does not
increase the real interest rate according to the market clearing
model because:a.the supply of capital services and demand for
capital services increase about the same amount. c.the demand for
capital services is downward sloping. b.neither demand for capital
services nor supply of capital services shift due to the permanent
increase in government purchases.d.the supply of capital services
is upward sloping.
51.Goernment expediture as a ratio to GDP since the 1980s
hasa.stabilized at about 1/3.c.grown from about 1/3 to 1/2.b.grown
from about 1/10 to 1/5.d.declined from about 1/3 to 1/5.
52.Data across more than 50 countries shows that the U.S. ratio
of government expediture to GDP isa.much higher than the median
ratio.c.slightly below the median ratio.b.one of the two highest
ratios.d.one of the two lowest ratios.
53.At the federal level, the largest expansions in transfer
payments have been from increases ina.unemployment
insurancec.welfare.b.Social Security.d.tax rebates.
54.U.S. data show that the ratio of Social Security, Medicare
and state and local Medicaid payments to GDP isa.less than
1%.c.about 50%.b.more than 98%.d.about 10%.
55.When the Barro model assumes lump-sum taxes, this meansa.real
taxes are independent of a households income.c.nominal taxes depend
negatively on a households consumption.b.nominal taxes depend
positively on a households income.d.there is no tax on
inheritances.
56.Suppose real government purchases equal $800 billion and real
government transfers equal $100 billion. If the nominal quantity of
money is constant, then real tax revenues musta.equal $700
billion.c.be greater than $8,100 billion.b.equal $900 billion.d.be
less than $100 billion.
57.Real disposable income for a household equalsa.the real
return on capital services.c.real income available after
taxes.b.the nominal wage rate.d.the real return on capital services
after taxes.
58.If a households real taxes increase by one unit, thena.real
government transfers to the household decreae by one unit.c.the
real return on capital services falls by one unit.b.real government
transfers to the househould increase by one unit.d.real disposable
income falls by one unit.
59.Adding government to the Barro model affects the household
budget constraint bya.adding the present value of real transfers
net of real taxes as a source of funds.c.adding the present value
of real transfers plus real taxes as a use of funds.b.adding and
subtracting the present value of real transfers net of real taxes
as a source of funds, for no net effect.d.subtracting the present
value of real transfers net of real taxes as a use of funds.
60.A permanent increase in government purchases willa.shift the
demand for capital services outward.c.shift the supply of capital
services inward.b.not shift the demand or supply of capital
services.d.shift the supply of capital services outward.
61.A permanent increase in government purchases willa.shift the
demand curve for labor invward.c.not shift the supply or demand
curves for labor.b.shift the supply curve for labor
outward..d.shift the demand curve for labor outward.
62.One empirical prediction from the model which includes
government purchases is thata.permanent changes in real government
purchases increase real GDP.c.permanent changes in nominal
government purchases increase nominal GDP.b.permanent changes in
real government purchases decrease real GDP.d.permanent changes in
real government purchases have little impact on real GDP.
63.One difference between a permanent and temporary increase in
government purchases is that with a temporary increase,a.expected
real disposable income in future years is unchanged.c.the expected
real wage rate in future years is higher.b.expected real disposable
income in future years is higher.d.the expected real wage rate in
future years is lower.
64.A temporary increase in government purchases, unlike a
permanent increase,a.comes mostly at the expense of a loss of
transfer payments.c.increases the real wage rate in future
years..b.comes mostly at the expense of a loss in gross
investment.d.comes mostly at the expense of a lower real interest
rate.
65.The data on temporary increases in government purchases
during wartimea.do not support the prediction that gross investment
would rise.c.do not support the prediction that GDP would be
unchanged.b.do not support the prediction that consumption would
rise.d.do support the prediction that GDP would be unchanged.
SHORT ANSWER
1.What is the governments budget constraint without government
borrowing and what does it show us?
2.How does government without borrowing affect the households
budget constraint?
3.What are the effects of a permanent increase in government
purchases in the market clearing model?
4.What are the effects of a temporary increase in government
purchases?
5.What has been the US experience in war time temporary increase
in government purchases and how do they conform with the
predictions of the model?
Chapter 13
TRUE/FALSE
1.The marginal tax rate is the change in taxes when taxable
income change one unit.
2.The term (1 - w) is the faction of labor income the worker
gets to keep.
3.An increase in the marginal tax on labor income, increases the
supply of labor.
4.An increase in the marginal tax on labor income, decreases the
demand for capital services.
5.A decrease in the marginal tax on asset income, reduces
investment short run and the capital stock and GDP in the long
run.
6.An increase in the marginal tax rate on labor income reduces
overall market activity, as gauged by GDP.
7.The largest sources of tax revenue for the U.S. federal
government include the individual income tax and social-insurance
contributions.
8.The largest source of tax revenue for the U.S. federal
government is the corporate-profit tax.
9.U.S. data show that state and local government revenues
currently far exceed federal government revenues.
10.A graduated income-tax rate has a marginal tax rate which
equals the average tax rate.
MULTIPLE CHOICE
1.The US Federal government gains revenue from:a.individual
income taxes.c.excise taxes. b.social insurance taxes.d.all of the
above.
2.The US Federal government gains revenue from:a.property
taxes.c.UN grants.b.social insurance taxes.d.all of the above.
3.The US Federal government gains revenue from:a.property
taxes.c.individual income taxes.b.sales taxes.d.all of the
above.
4.The US Federal government gains revenue from:a.revenue from
money creation.c.sales taxes.b.social insurance taxes.d.all of the
above.
5.The US Federal government gains revenue from:a.property
taxes.c.UN grants.b.excise taxes and customs.d.all of the
above.
6.The US state and local governments gains revenue
from:a.property taxes.c.sales taxes.b.income taxes.d.all of the
above.
7.The US state and local governments gains revenue
from:a.property taxes.c.sales taxes.b.income taxes.d.all of the
above.
8.The US state and local governments gains revenue
from:a.property taxes.c.revenue from money creation.b.customs.d.all
of the above.
9.The US state and local governments gains revenue
from:a.revenue from money creation.c.sales taxes.b.customs.d.all of
the above.
10.The US state and local governments gains revenue
from:a.customs.c.revenue from money creation.b.federal grants.d.all
of the above.
11.The US state and local governments gains revenue
from:a.revenue from money creation.c.income taxes.b.customs.d.all
of the above.
12.The marginal income tax rate is:a.taxes divided by
income.c.income divide by taxes.b.the change in taxes when income
changes one dollar.d.the change in income when taxes change one
dollar.
13.The average income tax rate is:a.income taxes divided by
income.c.income divide by income taxes.b.the change in income taxes
when income changes one dollar.d.the change in income when income
taxes change one dollar.
14.The average marginal income tax rate is:a.the marginal tax
rate of the average household.c.the change in income taxes divided
by income. b.the average tax rate of the marginal household.d.all
of the above.
15.A graduate-rate tax structure is one:a.whose marginal rate
increases as income increases.c.whose average rate equals the
marginal rate.b.that has a flat rate.d.whose marginal rate
decreases as income increases.
16.A flat-rate tax structure is one:a.whose marginal rate
increases as income increases.c.whose average rate equals the
marginal rate.b.that has graduated rates.d.whose marginal rate
decreases as income increases.
17.One less the marginal tax on wages, (1 - w) is:a.the fraction
of wage income paid in taxes.c.the fraction of income the
government receives. b.the fraction of wage income the worker gets
to keep.d.the average marginal tax rate.
18.The after tax real wage is:a.(w/P) wc.(w/P)(1 - w)b.(w/P)L(1
- w)d.(w/P)/(1 - w)
19.If government purchases are constant, then an increase in the
marginal income tax rate, w, leads to:a.a positive income
effect.c.no income effect.b.a negative income effect.d.a marginal
income effect.
20.If the marginal tax rate on income, w, changes but government
purchases dont then the government could have:a.lowered some other
lower marginal rate wage tax like the social security payroll
tax.c.raised some income tax deductions.b.the increased revenue due
to the higher marginal tax rate is all used for real
transfers.d.all of the above.
21.If the marginal tax rate on income, w, changes but government
purchases dont then the government could have:a.lowered some other
lower marginal rate wage tax like the social security payroll
tax.c.reduced some income tax deductions.b.reduced real
transfers.d.all of the above.
22.If the marginal tax rate on income, w, changes but government
purchases dont then the government could have:a.raised some other
lower marginal rate wage tax.c.reduced some income tax
deductions.b.used all the increased revenue due to the higher
marginal tax rate for real transfers.d.all of the above.
23.If the marginal tax rate on income, w, changes but government
purchases dont then the government could have:a.raised some other
lower marginal rate wage tax.c.raised some income tax
deductions.b.lowered real transfers.d.all of the above.
24.If the real marginal tax rate, w, increases in the market
clearing model then:a.the supply of labor decreases.c.real output,
Y, declines.b.the demand for capital decreases. d.all of the
above.
25.If the real marginal tax rate, w, increases in the market
clearing model then:a.the supply of labor decreases.c.real output,
Y, rises.b.the demand for capital increases. d.all of the
above.
26.If the real marginal tax rate, w, increases in the market
clearing model then:a.the supply of labor increases.c.real output,
Y, declines.b.the demand for capital increases. d.all of the
above.
27.If the real marginal tax rate, w, increases in the market
clearing model then:a.the supply of labor increases.c.real output,
Y, rises.b.the demand for capital decreases. d.all of the
above.
28.The after tax real interest rate is:a.r/ r c.(1- r)rb.(1+
r)/(1+r)d. r/r
29.In the short run if the tax rate on asset income, r , rises,
then in the market clearing model:a.household current consumption
will rise compared to future consumption.c.the after tax real
interest rate falls.b.current investment will fall. d.all of the
above.
30.In the short run if the tax rate on asset income, r , rises,
then in the market clearing model:a.household current consumption
will rise compared to future consumption. c.the after tax real
interest rate rises.b.current investment will rise. d.all of the
above.
31.In the short run if the tax rate on asset income, r , rises,
then in the market clearing model:a.household current consumption
will fall compared to future consumption.c.the after tax real
interest rate rises.b.current investment will fall. d.all of the
above.
32.In the short run if the tax rate on asset income, r , rises,
then in the market clearing model:a.household current consumption
will fall compared to future consumption. c.the after tax real
interest rate falls.b.current investment will rise. d.all of the
above.
33.In the long run an increase in the marginal tax rate on asset
income, r, in the market clearing model:a.increases the stock of
capital and real GDP.c.decreases the stock of capital and real
GDP.b.increases the stock of capital and decreases real
GDP.d.decreases the stock of capital and increases real GDP.
34.In the long run an increase in the marginal tax rate on asset
income, r, in the market clearing model:a.decreases GDP.c.lowers
consumption.b.decrease the capital stock.d.all of the above.
35.In the long run an increase in the marginal tax rate on asset
income, r, in the market clearing model:a.increases GDP.c.raises
consumption.b.decrease the capital stock.d.all of the above.
36.In the long run an increase in the marginal tax rate on asset
income, r, in the market clearing model:a.decreases GDP.c.raises
consumption.b.increase the capital stock.d.all of the above.
37.With an increase in government purchases financed by an
increase in the marginal tax rate on labor income, the change in
labor supply depends on whether the:a.negative substitution effect
is bigger than the positive income effect. c.positive substitution
effect is bigger than the negative income effect. b.negative
substitution effect is bigger than the negative income effect.
d.positive substitution effect is bigger than the positive income
effect.
38.An increase in government purchases financed by an increase
in the marginal tax rate on labor income, increases the quantity of
labor supplied, if the:a.negative substitution effect is bigger
than the positive income effect. c.positive substitution effect is
bigger than the negative income effect. b.negative substitution
effect is smaller than the positive income effect. d.positive
substitution effect is smaller than the negative income effect.
39.An increase in government purchases financed by an increase
in the marginal tax rate on labor income, decreases the quantity of
labor supplied, if the:a.negative substitution effect is bigger
than the positive income effect. c.positive substitution effect is
bigger than the negative income effect. b.negative substitution
effect is smaller than the positive income effect. d.positive
substitution effect is smaller than the negative income effect.
40.If there is an decrease in government purchases along with a
decrease in the marginal tax rate on labor income, then:a.the
income effect would be toward a decrease in labor supply. c.the
substitution effect would be towards an increase in labor
supply.b.the overall effect on labor supply is uncertain. d.all of
the above.
41.If there is an decrease in government purchases along with a
decrease in the marginal tax rate on labor income, then:a.the
income effect would be toward a decrease in labor supply. c.the
substitution effect would be towards an decrease in labor
supply.b.the overall effect on labor supply is negative. d.all of
the above.
42.If there is an decrease in government purchases along with a
decrease in the marginal tax rate on labor income, then:a.the
income effect would be toward an increase in labor supply. c.the
substitution effect would be towards an increase in labor
supply.b.the overall effect on labor supply is positive. d.all of
the above.
43.If there is an decrease in government purchases along with a
decrease in the marginal tax rate on labor income, then:a.the
income effect would be toward an increase in labor supply. c.the
substitution effect would be towards a decrease in labor
supply.b.the overall effect on labor supply is uncertain. d.all of
the above.
44.If the marginal tax on labor income, w, rises then the tax
receipts of the government:a.rise.c.stay the say.b.fall.d.may rise,
fall or stay the same.
45.If transfer payments are related to characteristics of
households like income, then an increase in the marginal tax on
labor income, w,:a.will have smaller effects in the market clearing
model. c.will have the same effects in the market clearing
model.b.will have stronger effects in the market clearing
model.d.will have no effects in the market clearing model.
46.A decrease in the marginal tax rate on asset income, r, in
the short run in the market clearing model:a.does not change the
stock of capitalc.does not change the market clearing rental price
of capital.b.does not change real GDP.d.all of the above.
47.A decrease in the marginal tax rate on asset income, r, in
the short run in the market clearing model:a.does not change the
stock of capitalc.reduces the market clearing rental price of
capital.b.decreases real GDP.d.all of the above.
48.A decrease in the marginal tax rate on asset income, r, in
the short run in the market clearing model:a.raises the stock of
capitalc.does not change the market clearing rental price of
capital.b.increases real GDP.d.all of the above.
49.A decrease in the marginal tax rate on asset income, r, in
the short run in the market clearing model:a.raises the stock of
capitalc.reduces the market clearing rental price of capital.b.does
not change real GDP.d.all of the above.
50.A decrease in the marginal tax rate on asset income, r, in
the short run in the market clearing model:a.raises change the
stock of capitalc.increases gross investment.b.increases real
GDP.d.all of the above.
51.From 1929 to the present, total government revenue grew to be
abouta.30% of GDP.c.10% of GDP.b.50% of GDP.d.1% of GDP.
52.Before World War II, state and local government revenue
comprised abouta.less than one-third of total government
revenues.c.10% of total government revenues.b.more than half of
total government revenues.d.0% of total government revenues.
53.Since World War II, state and local government revenues have
been aa.growing share of total government revenues.c.shrinking
share of total government revenues.b.stable share of total
government revenues.d.miniscule share of total government
revenues.
54.Individual income taxes in the U.S.a.began during the
Revolution.c.affect only the richest 10% of people.b.are an
insignficant source of revenue. d.mostly began in 1913.
55.The major sources of federal government revenue, in
descending order of their importance, area.individual income taxes,
social-insurance contributions, and corporate profits
taxes.c.payments from the Federal Reserve, corporate profits taxes,
and individual income taxes.b.social-insurance contributions,
corporate profits taxes, and individual income taxes.d.corporate
profits taxes, payments from the Federal Reserve, and individual
income taxes.
56.The single largest source of federal government revenue from
those listed below isa.taxes on corporate profits.c.excise and
customs taxes.b.individual income taxes.d.payments from the Federal
Reserve to the U.S. Treasury.
57.The U.S. federal income-tax structure is designed so
thata.all citizens pay a flat marginal tax rate.c.the marginal tax
rate generally rises with income.b.the average tax rate falls as
income rises.d.all citizens pay a flat average tax rate.
58.Data on U.S individual income taxes shows that the income
taxa.is not graduated, because higher-income citizens pay a high
share of the taxes. c.is flat, because higher-income citizens pay a
low share of the taxes.b.is flat, because higher-income citizens
pay a high share of the taxes.d.is graduated, because higher-income
citizens pay a high share of the taxes.
59.Data on U.S adjusted gross income show that the income tax is
progressive becausea.high-income citizens pay a high share of taxes
relative to the share of income they receive.c.low-income citizens
pay a high share of taxes relative to the share of income they
receive.b.high-income citizens pay a low share of taxes relative to
the share of income they receive.d.all citizens pay a high share of
taxes relative to the share of income they receive.
60.Historical data on U.S. marginal taxes rates show, that on
average, the marginal tax ratea.fell during the Korean War in the
1950s to an all-time low.c.were at their highest in the pre-World
War II era.b.rose after World War II to a high of about 40% in
1981.d.none of the above.
61.The U.S. Social Security contribution or tax on
individualsa.is a graduated tax for incomes up to $94,200.c.is a
flat tax for incomes up to $94,200.b.is a graduated tax for all
incomes, with no upper limit.d.is a progressive tax for all incomes
up to $10,000.
62.The U.S. Social Security contribution or tax on individuals
has a marginal tax rate which equals the average tax rate. This
makes ita.a progressive tax.c.an alternating tax.b.a depreciating
tax.d.a flat tax.
63.An increase in the marginal tax rate on labor income will
shift thea.labor supply curve leftward.c.labor demand curve
rightward.b.labor supply curve rightward.d.labor demand curve
leftward.
64.An increase in the marginal tax rate on labor income will
shift thea.supply curve for capital services leftward.c.demand
curve for capital services leftward.b.supply curve for capital
services rightward.d.demand curve for capital services
rightward.
65.A decrease in the marginal tax rate on labor income will
shift thea.labor supply curve leftward.c.labor demand curve
rightward.b.labor supply curve rightward.d.labor demand curve
leftward.
66.The Laffer Curve shows that total real tax revenuea.rises
continuously as the marginal tax rate rises.c.falls, then rises, as
the marginal tax rate rises.b.falls continuously as the marginal
tax rate rises.d.rises, then falls, as the marginal tax rate
rises.
SHORT ANSWER
1.What are the effects of an increase in the marginal tax rate
on labor income in the market clearing model?
2.What does (1 - w) tell us and what are the real after tax
returns on assets and labor if income from them are taxed?
3.What are the short run effects of an increase in the marginal
tax rate on assets income in the market clearing model?
4.What are the long run effects of an increase in the marginal
tax rate on asset income in the market clearing model?
5.Under what conditions in the market clearing model will the
quantity of labor supplied increase when government purchases are
increased and financed by an increase in the marginal tax rate on
labor income?
6.What are the major sources of revenue for the U.S. government,
and which are most important today?
7.Explain the difference between a graduated-rate tax and a
flat-rate tax.