The effects of tax cuts or government spending dissipate and each additional change in consumption and income becomes smaller and smaller because
A) some of the increase in income will be lost through taxation.
B) some of the increase is saved and does not result in an increase in consumer demand.
C) some of the increase in consumption will be an additional demand for imported goods.
D) All of the above.
E) None of the above.
Question 2 - What do economists call movements of labor and capital between nations?
What will be an ideal response?
Question 3 - International trade
A) accounts for more than 90 percent of world economic activity.
B) is a relatively small (about 30 percent of world output) but growing part of world economic activity.
C) has been growing at about the same rate as the world economy.
D) Both A and C.
Question 4 - In which way are tariffs different from quotas?
A) They reduce the volume of imported products.
B) They raise the price of the imported products to consumers.
C) They increase the domestic quantity supplied of the product.
D) They raise government revenue.
Question 5 - Starting from a balanced budget, which of the following would NOT cause a deficit?
A) A decrease in taxes
B) An increase in spending of goods and services
C) An increase in transfer payments
D) A 50 percent increase in spending accompanied by a 40 percent increase in taxes
E) None of the above.
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