Question 1

Which piece of evidence is consistent with zero crowding out?

Accepted Answer

A)  Government purchases rise and Real GDP does not change. 
B)  Government purchases rise and investment spending declines. 
C)  Government purchases rise and net exports decline. 
D)  Government purchases rise and consumption declines. 
E)  none of the above 
A)  Government purchases rise and Real GDP does not change. 
B)  Government purchases rise and investment spending declines. 
C)  Government purchases rise and net exports decline. 
D)  Government purchases rise and consumption declines. 
E)  none of the above

Question 2

-Refer to Exhibit 11-5 which summarizes the situation prior to the value added tax (VAT).If the government imposes a VAT rate of 10 percent,the miller must pay ___________ in VAT tax and will need to raise the price he charges the baker to _______________.

Accepted Answer

A)  $0.06; $0.66 
B)  $0.08; $0.88 
C)  $0.08; $1.54 
D)  $0.60; $1.20 
A)  $0.06; $0.66 
B)  $0.08; $0.88 
C)  $0.08; $1.54 
D)  $0.60; $1.20

Question 3

Suppose that in a certain nation the flat income tax rate of 40 percent is reduced to 35 percent and as a result the tax base rises from $400 billion to $600 billion.As a result,ax revenues __________,indicating the nation is on the __________ portion of its Laffer curve.

Accepted Answer

A)  rise; upward-sloping 
B)  rise; downward-sloping 
C)  fall; upward-sloping 
D)  fall; downward-sloping 
A)  rise; upward-sloping 
B)  rise; downward-sloping 
C)  fall; upward-sloping 
D)  fall; downward-sloping

Question 4

Suppose aggregate demand is too low to bring about the Natural Real GDP level.A Keynesian policy prescription would call for a(n)_____________________ to close this recessionary gap.

Accepted Answer

A)  increase in government spending 
B)  decrease in government spending 
C)  increase in taxes 
D)  decrease in taxes 
E)  a or d 
A)  increase in government spending 
B)  decrease in government spending 
C)  increase in taxes 
D)  decrease in taxes 
E)  a or d

Question 5

-Refer to Exhibit 11-4.If a person's taxable income is $20,000,how much does he pay in taxes?

Accepted Answer

A)  $600 
B)  $34,000 
C)  $3,400 
D)  $3,000 
A)  $600 
B)  $34,000 
C)  $3,400 
D)  $3,000

Question 6

-Use the information provided in Exhibit 11-4.What is the marginal tax rate on the 23,001st dollar of taxable income earned?

Accepted Answer

A)  17% 
B)  20% 
C)  25% 
D)  30% 
E)  There is not enough information provided to answer this question. 
A)  17% 
B)  20% 
C)  25% 
D)  30% 
E)  There is not enough information provided to answer this question.

Question 7

A taxpayer pays __________ tax rate on additional income if the income tax structure is progressive,__________ tax rate on additional income if the income tax structure is proportional,and __________ tax rate on additional income if the income tax structure is regressive.

Accepted Answer

A)  a higher; a lower; the same 
B)  a higher; the same; a lower 
C)  a lower; a higher; the same 
D)  the same; a lower; a higher 
E)  the same; a higher; a lower 
A)  a higher; a lower; the same 
B)  a higher; the same; a lower 
C)  a lower; a higher; the same 
D)  the same; a lower; a higher 
E)  the same; a higher; a lower

Question 8

__________ flows from government to households.

Accepted Answer

A)  A transfer payment 
B)  A tax payment 
C)  The Laffer Curve 
D)  Crowding out 
A)  A transfer payment 
B)  A tax payment 
C)  The Laffer Curve 
D)  Crowding out

Question 9

Suppose the economy is in a recessionary gap.If government expenditures are currently $3.5 trillion and tax revenues are currently $2.9 trillion,the (total)budget deficit is _____________.Assume that economists estimate that if the economy were operating at full employment,government expenditures would be $3.2 trillion and tax revenues would be $3.1 trillion.The structural deficit must be_________________ and the cyclical deficit must be _______________.

Accepted Answer

A)  $3.5 trillion; $2.9 trillion; $600 billion 
B)  $600 billion; $300 billion; $300 billion 
C)  $600 billion; $100 billion; $500 billion 
D)  $600 billion; $500 billion; $100 billion 
E)  $500 billion; $100 billion; $400 billion 
A)  $3.5 trillion; $2.9 trillion; $600 billion 
B)  $600 billion; $300 billion; $300 billion 
C)  $600 billion; $100 billion; $500 billion 
D)  $600 billion; $500 billion; $100 billion 
E)  $500 billion; $100 billion; $400 billion

Question 10

The top 1% of income earners in the U.S.(those with the highest taxable incomes)pay

Accepted Answer

A)  about the same percentage of their incomes in taxes as the average U.S.taxpayer. 
B)  a much lower percentage of their incomes in taxes than the average U.S.taxpayer. 
C)  a much higher percentage of their incomes in taxes than the average U.S.taxpayer. 
D)  about 15 percent of their incomes in income taxes 
E)  a and d 
A)  about the same percentage of their incomes in taxes as the average U.S.taxpayer. 
B)  a much lower percentage of their incomes in taxes than the average U.S.taxpayer. 
C)  a much higher percentage of their incomes in taxes than the average U.S.taxpayer. 
D)  about 15 percent of their incomes in income taxes 
E)  a and d

Question 11

The answer is: "After a policy measure is implemented,it takes time to affect the economy." What is the question?

Accepted Answer

A)  What is the wait-and-see lag? 
B)  What is the data lag? 
C)  What is the effectiveness lag? 
D)  What is the transmission lag? 
E)  What is the legislative lag? 
A)  What is the wait-and-see lag? 
B)  What is the data lag? 
C)  What is the effectiveness lag? 
D)  What is the transmission lag? 
E)  What is the legislative lag?

Question 12

-Use the information provided in Exhibit 11-4.If a person's taxable income is $110,000,how much does he pay in taxes?

Accepted Answer

A)  $21,750 
B)  $33,000 
C)  $24,750 
D)  $28,410 
A)  $21,750 
B)  $33,000 
C)  $24,750 
D)  $28,410

Question 13

Suppose that in a certain nation,the flat income tax rate of 70 percent falls to 65 percent and as a result the tax base rises from $500 billion to $575 billion.As a result,tax revenues __________,indicating the nation is on the __________ portion of its Laffer curve.

Accepted Answer

A)  rise; upward-sloping 
B)  rise; downward-sloping 
C)  fall; upward-sloping 
D)  fall; downward-sloping 
A)  rise; upward-sloping 
B)  rise; downward-sloping 
C)  fall; upward-sloping 
D)  fall; downward-sloping

Question 14

Expansionary fiscal policy actions include __________ government spending and/or __________ taxes,while contractionary fiscal policy actions include __________ government spending and/or __________ taxes.

Accepted Answer

A)  increasing; increasing; decreasing; decreasing 
B)  decreasing; decreasing; increasing; increasing 
C)  increasing; decreasing; increasing; decreasing 
D)  decreasing; increasing; increasing; decreasing 
E)  increasing; decreasing; decreasing; increasing 
A)  increasing; increasing; decreasing; decreasing 
B)  decreasing; decreasing; increasing; increasing 
C)  increasing; decreasing; increasing; decreasing 
D)  decreasing; increasing; increasing; decreasing 
E)  increasing; decreasing; decreasing; increasing

Question 15

If company Z is receiving a government subsidy,the government is taking money from ____________ and giving it to company Z.If company Z is getting a tax deduction (instead of receiving a subsidy)then company Z is ______________________.

Accepted Answer

A)  taxpayers; paying more in taxes than it would without the tax deduction 
B)  taxpayers; subsidizing the taxpayers 
C)  Congress; paying more in taxes than it would without the tax deduction 
D)  taxpayers; paying less in taxes than it would without the tax deduction 
A)  taxpayers; paying more in taxes than it would without the tax deduction 
B)  taxpayers; subsidizing the taxpayers 
C)  Congress; paying more in taxes than it would without the tax deduction 
D)  taxpayers; paying less in taxes than it would without the tax deduction

Question 16

The economy is in a recessionary gap,there is incomplete crowding out,and government implements expansionary fiscal policy.It follows that

Accepted Answer

A)  Real GDP will fall. 
B)  the AD curve will shift to the right. 
C)  the price level will fall. 
D)  the recessionary gap will necessarily be completely eliminated. 
E)  b and d 
A)  Real GDP will fall. 
B)  the AD curve will shift to the right. 
C)  the price level will fall. 
D)  the recessionary gap will necessarily be completely eliminated. 
E)  b and d

Question 17

To eliminate an inflationary gap,Keynesian theory indicates that government should

Accepted Answer

A)  increase taxes. 
B)  decrease taxes. 
C)  increase government purchases. 
D)  decrease government purchases. 
E)  either a or d 
A)  increase taxes. 
B)  decrease taxes. 
C)  increase government purchases. 
D)  decrease government purchases. 
E)  either a or d

Question 18

According to Keynesian theory,a recessionary gap can be closed using expansionary fiscal policy.

Accepted Answer

A) True 
 B)False

Question 19

The transmission lag is the time between

Accepted Answer

A)  the implementation of a policy and when the impact of the policy is felt. 
B)  the enactment of a policy (getting a policy passed by Congress with the president's approval)and the implementation of the policy (putting a policy into effect). 
C)  realizing a policy is needed and enacting the policy. 
D)  the occurrence of an event and policymakers realizing the event has occurred. 
A)  the implementation of a policy and when the impact of the policy is felt. 
B)  the enactment of a policy (getting a policy passed by Congress with the president's approval)and the implementation of the policy (putting a policy into effect). 
C)  realizing a policy is needed and enacting the policy. 
D)  the occurrence of an event and policymakers realizing the event has occurred.

Question 20

-Refer to Exhibit 11-5 which summarizes the situation prior to the value added tax (VAT).If the government imposes a VAT rate of 10 percent,the government will receive ___________ in VAT revenue per loaf of bread sold and the final consumer will find that he has to pay _______________ more for a loaf of bread than he did prior to the VAT tax.

Accepted Answer

A)  $0.25; $2.53 
B)  $0.11; $2.75 
C)  $0.25; $0.25 
D)  $0.03; $2.75 
A)  $0.25; $2.53 
B)  $0.11; $2.75 
C)  $0.25; $0.25 
D)  $0.03; $2.75

Exam 11: Monopolistic Competition, oligopoly, and Game Theory

Which piece of evidence is consistent with zero crowding out?

-Refer to Exhibit 11-5 which summarizes the situation prior to the value added tax (VAT).If the government imposes a VAT rate of 10 percent,the miller must pay ___________ in VAT tax and will need to raise the price he charges the baker to _______________.

Suppose that in a certain nation the flat income tax rate of 40 percent is reduced to 35 percent and as a result the tax base rises from $400 billion to $600 billion.As a result,ax revenues __________,indicating the nation is on the __________ portion of its Laffer curve.

Suppose aggregate demand is too low to bring about the Natural Real GDP level.A Keynesian policy prescription would call for a(n)_____________________ to close this recessionary gap.

-Refer to Exhibit 11-4.If a person's taxable income is $20,000,how much does he pay in taxes?

-Use the information provided in Exhibit 11-4.What is the marginal tax rate on the 23,001st dollar of taxable income earned?

A taxpayer pays __________ tax rate on additional income if the income tax structure is progressive,__________ tax rate on additional income if the income tax structure is proportional,and __________ tax rate on additional income if the income tax structure is regressive.

__________ flows from government to households.

The top 1% of income earners in the U.S.(those with the highest taxable incomes)pay

The answer is: "After a policy measure is implemented,it takes time to affect the economy." What is the question?

-Use the information provided in Exhibit 11-4.If a person's taxable income is $110,000,how much does he pay in taxes?

Suppose that in a certain nation,the flat income tax rate of 70 percent falls to 65 percent and as a result the tax base rises from $500 billion to $575 billion.As a result,tax revenues __________,indicating the nation is on the __________ portion of its Laffer curve.

Expansionary fiscal policy actions include __________ government spending and/or __________ taxes,while contractionary fiscal policy actions include __________ government spending and/or __________ taxes.

If company Z is receiving a government subsidy,the government is taking money from ____________ and giving it to company Z.If company Z is getting a tax deduction (instead of receiving a subsidy)then company Z is ______________________.

The economy is in a recessionary gap,there is incomplete crowding out,and government implements expansionary fiscal policy.It follows that

To eliminate an inflationary gap,Keynesian theory indicates that government should

According to Keynesian theory,a recessionary gap can be closed using expansionary fiscal policy.

The transmission lag is the time between

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free,controlled,and Relative

Supply,demand,and Price: Applications

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,union,and Labor

The Distribution of Income and Poverty

Interest,rent,and Profit

Market Failure: Externalities, public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government: Five Topics Considered

Stocks,bonds,futures,and Options

Stocks,bonds,futures,and Options

Filters

-Refer to Exhibit 11-5 which summarizes the situation prior to the value added tax (VAT).If the government imposes a VAT rate of 10 percent,the miller must pay _ in VAT tax and will need to raise the price he charges the baker to _____.

Suppose that in a certain nation the flat income tax rate of 40 percent is reduced to 35 percent and as a result the tax base rises from $400 billion to $600 billion.As a result,ax revenues ,indicating the nation is on the portion of its Laffer curve.

A taxpayer pays tax rate on additional income if the income tax structure is progressive, tax rate on additional income if the income tax structure is proportional,and __ tax rate on additional income if the income tax structure is regressive.

Suppose that in a certain nation,the flat income tax rate of 70 percent falls to 65 percent and as a result the tax base rises from $500 billion to $575 billion.As a result,tax revenues ,indicating the nation is on the portion of its Laffer curve.

Expansionary fiscal policy actions include government spending and/or taxes,while contractionary fiscal policy actions include government spending and/or taxes.

If company Z is receiving a government subsidy,the government is taking money from and giving it to company Z.If company Z is getting a tax deduction (instead of receiving a subsidy)then company Z is __________.