Question :
21) If a tax cut increases aggregate demand more than : 1238216
21) If a tax cut increases aggregate demand more than aggregate supply, real GDP ________ and the price level ________.
A) increases; rises
B) increases; falls
C) decreases; rises
D) decreases; falls
E) increases; does not change
22) How could an expansionary fiscal policy increase real GDP and lower the price level?
A) if aggregate supply decreases more than aggregate demand increases
B) if aggregate supply increases more than aggregate demand increases
C) if the aggregate supply increases equals the aggregate demand increase
D) if aggregate supply decreases more than aggregate demand decreases
E) if aggregate supply decreases less than aggregate demand decreases
23) When taxes are cut, aggregate demand ________ and aggregate supply ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) increases; does not change
24) The quantity of employment is determined in the ________ market and that quantity, along with the ________, determines potential GDP.
A) loanable funds; production function
B) goods and services; labor market
C) labor market; tax rate
D) labor market; production function
E) labor market; tax wedge
25) Increasing the income tax rate ________ the ________.
A) decreases; demand for labor
B) increases; supply of labor
C) decreases; supply of labor
D) does not change; supply of labor
E) increases; demand for labor
26) Increasing the income tax rate ________ the before-tax real wage rate and ________ the after-tax real wage rate.
A) raises; raises
B) does not change; raises
C) lowers; lowers
D) lowers; raises
E) raises; lowers
27) If the income tax rate is 20 percent and the tax rate on consumption expenditure is 15 percent, then the tax wedge is
A) 2 percent.
B) 5 percent.
C) 35 percent.
D) 300 percent.
E) None of the above answers is correct.
28) The supply-side effects of an income tax cut ________ potential GDP and ________ aggregate supply.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) increases; do not change
29) An income tax on labor income decreases the ________ of potential GDP, and a tax on interest income decreases the ________ of potential GDP.
A) level; growth rate
B) growth rate; level
C) level; level
D) growth rate; growth rate
E) None of the above answers is correct.
30) If the nominal interest rate is 10 percent, the inflation rate is 6 percent, and the tax rate on interest income is 25 percent, what is the after-tax real interest rate?
A) 4.0 percent
B) 6.0 percent
C) 3.0 percent
D) 1.5 percent
E) 3.5 percent
31) An income tax cut ________ aggregate demand and ________ aggregate supply.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) does not change; increases
32) If fiscal stimulus creates a large budget ________, then in the long run economic growth ________.
A) surplus; increases
B) surplus; decreases
C) deficit; increases
D) deficit; decreases
E) None of the above answers is correct.
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