ECO 302 Week 8 Quiz - Strayer
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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 household’s 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 )/P c. 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
government’s budget constraint is:
a. Gt + Vt = Tt + (Mt - Mt-1 )/P c. -Gt = Vt - Tt, if revenue from money creation is
zero.
b. Gt + Vt - Tt = (Mt - Mt-1 )/P d. all
of the above.
10. The
government’s 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 government’s budget constraint
without borrowing is:
a. Gt + Vt = Tt. c. Gt = Vt - Tt
b. Gt = Vt + Tt. d. all of the above.
12. If
the money supply does not change, then the government’s budget constraint
without borrowing is:
a. Gt - Vt = Tt c. -Gt = Vt - Tt
b. Gt = Vt - Tt d. all of the above.
13. Among
the government’s sources of funds are;
a. transfer payments. c. government
purchases.
b. tax revenue. d. all of the
above.
14. Among
the government’s sources of funds are;
a. transfer payments. c. real
revenue from printing money.
b. government purchases. d. all
of the above.
15. Among
the government’s uses of funds are;
a. transfer payments. c. real
revenue from printing money.
b. tax revenue. d. all of the
above.
16. Among
the government’s 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 household’s 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 household’s budget constraint.
19. If
a household’s 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 household’s 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 has
a. 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 is
a. 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 in
a. unemployment insurance c. 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 is
a. less than 1%. c. about 50%.
b. more than 98%. d. about 10%.
55. When
the Barro model assumes lump-sum taxes, this means
a. real taxes are independent of a
household’s income. c. nominal taxes depend negatively on a
household’s consumption.
b. nominal taxes depend positively on a
household’s 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 must
a. 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 equals
a. 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 household’s real taxes increase by one unit, then
a. 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 by
a. 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 will
a. 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 will
a. 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 that
a. 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 wartime
a. 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 government’s budget constraint without government borrowing and what
does it show us?
2. How
does government without borrowing affect the household’s 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)• w c. (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 don’t 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 don’t 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 don’t 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 don’t 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)•r
b. (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 capital c. 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 capital c. 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 capital c. 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 capital c. 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 capital c. increases
gross investment.
b. increases real GDP. d. all
of the above.
51. From
1929 to the present, total government revenue grew to be about
a. 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 about
a. 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 a
a. 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, are
a. 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 is
a. 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 that
a. 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 tax
a. 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 because
a. 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 rate
a. 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 individuals
a. 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 it
a. 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 the
a. 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 the
a. 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 the
a. 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 revenue
a. 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.
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