The Laffer curve is a graph of the relationship between tax rates and:
a. real GDP.
b. total tax revenues.
c. government spending.
d. inflation.
QUESTION 2The long-run Phillips curve:
a. is horizontal.
b. is the same as the short-run Phillips curve.
c. displays a positive relationship rather than an inverse relationship.
d. is exponential.
e. is vertical.
QUESTION 3If the consumer price index (CPI) in Year 1 was 200 and the CPI in Year 2 was 215, the rate of inflation was:
a. 215 percent.
b. 15 percent.
c. 5 percent.
d. 7.5 percent.
e. 8 percent.
QUESTION 4During the Reagan administration, the Laffer curve was used to ague that:
a. the supply-side effects of tax cuts are relatively small.
b. discretionary tax cuts are unwise because they create stagflation.
c. lower income tax rates could increase tax revenues.
d. a flat tax would simplify the tax code and stimulate economic growth.
QUESTION 5The relationship between inflation and unemployment shown along a Phillips curve is a(n):
a. direct relationship.
b. quadratic relationship.
c. exponential relationship.
d. inverse relationship.
e. parabolic relationship.
QUESTION 6One way the consumer price index (CPI) differs from the GDP chain price index is that it:
a. includes only purchases of items bought by typical urban consumers.
b. uses only current year quantities.
c. is based on all final goods and services.
d. includes only services.
QUESTION 7According to the Laffer curve, the federal tax rate affects:
a. incentive to work.
b. savings.
c. investment.
d. tax revenue.
e. All of these.
QUESTION 8The inverse trade-off between inflation and unemployment is known as the:
a. Laffer curve.
b. aggregate supply curve.
c. Phillips curve.
d. aggregate demand curve.
e. Keynesian curve.
QUESTION 9One way the consumer price index (CPI) differs from the GDP chain price index is that the CPI:
a. uses current year quantities of goods and services.
b. includes separate market baskets of goods and services for both base and current years.
c. includes only goods and services bought by typical urban consumers.
d. is bias free.