The Laffer curve represents the relationship between real GDP and various possible tax rates.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 2Assume that the real rate of interest is 5 percent and a lender charges a nominal interest rate of 15 percent. If a borrower expects that the rate of inflation next year will be 10 percent and the actual rate of inflation next year is 12 percent:
a. neither the borrower nor the lender benefits from inflation.
b. both the borrower and the lender lose from inflation.
c. the borrower benefits from inflation, while the lender loses from inflation.
d. the lender benefits from inflation, while the borrower loses from inflation.
QUESTION 3Supply-side fiscal policies focus on improving the incentives to work, save, and invest.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 4The belief that the government can do absolutely nothing in either the short run or the long run to reduce the unemployment rate, because people will anticipate the government's actions, is held by the:
a. rational expectations school.
b. neo-Keynesian school.
c. classical school.
d. supply-side school.
e. Keynesian school.
QUESTION 5If the rate of inflation in a given time period turns out to be higher than lenders and borrowers anticipated, then the effect will be:
a. no change in the distribution of wealth between lenders and borrowers.
b. a net gain in purchasing power for lenders relative to borrowers.
c. a redistribution of wealth from borrowers to lenders.
d. a redistribution of wealth from lenders to borrowers.
QUESTION 6Supply-side fiscal policies were advocated by the Reagan administration.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 7Which of the following groups believes that government policy is undermined by people's incorporation of the anticipated consequences of the policy into their present decisions?
a. Classical school.
b. Keynesian school.
c. Neo-Keynesian school.
d. Rational expectations school.
e. Supply-side school.
QUESTION 8If the rate of inflation in a given time period turns out to be lower than lenders and borrowers anticipated, then the effect will be:
a. a redistribution of wealth from borrowers to lenders.
b. a redistribution of wealth from lenders to borrowers.
c. a net loss in purchasing power for lenders relative to borrowers.
d. a net gain in purchasing power for borrowers relative to lenders.
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