Supply-side economics stress that:
a. aggregate demand is the major determinant of real output.
b. higher tax rates discourage people from working and investing as much as they would at lower tax rates.
c. an increase in government expenditures and tax rates will cause real income to rise.
d. expansionary monetary policy will cause real output to expand without accelerating inflation.
Question 2Which of following policies of the Congress was aimed to place the Fed above politics and maintain continuity in the policymaking process?
a. The President elects the entire Board of Governors.
b. The Federal Reserve district banks elects the Board of Governors.
c. The Congress elects a board member every five years.
d. One board member's term expires every second year.
e. Only bankers are allowed to be appointed as board members.
Question 3Technological progress increases the efficiency of mass producing HDTV-capable television sets. At the same time, more cable and television networks begin broadcasting in HDTV format, increasing the appeal of HDTV-capable television sets. On the basis of this information, what can be said about conditions in the HDTV market?
a. The equilibrium quantity and price of HDTV-capable sets will increase.
b. The equilibrium quantity of HDTV-capable sets will increase and price will decrease.
c. The equilibrium quantity of HDTV-capable sets will increase and what happens to price is indeterminate.
d. The equilibrium quantity of HDTV-capable sets will decrease and price will increase.
Question 4Which of the following propositions would a proponent of supply-side economics be most likely to stress?
a. Higher marginal tax rates will lead to a reduction in the budget deficit and lower interest rates, because they expand government revenues.
b. Higher marginal tax rates promote economic inefficiency and thereby retard aggregate output, because they encourage investors to undertake low-productivity projects with substantial tax-shelter benefits.
c. Income redistribution payments will exert little impact on real aggregate supply, since they do not consume resources directly.
d. A tax reduction will increase the disposable income of households. Thus the primary impact of a tax reduction on aggregate supply will stem from the influence of the tax change on the size of the budget deficit or surplus.
Question 5The Board of Governors of the Federal Reserve is:
a. appointed by the president, and each governor serves a 7-year term.
b. appointed by the president, and each governor serves a 14-year term.
c. elected by Congress, and each governor serves a 10-year term.
d. elected by Congress, and each governor serves a 4-year term.
e. elected by Congress, and each governor serves a 7-year term
Question 6There is an increase in demand for personal computers at the same time their input costs fall. We would expect that:
a. price will fall, but the effect on quantity sold is uncertain.
b. the quantity sold will decline, but the effect on price is uncertain.
c. the quantity sold will increase, but the effect on price is uncertain.
d. price will rise, but the effect on quantity sold is uncertain.
Question 7Which of the following tax changes would a supply-side economist be most likely to favor?
a. eliminating an investment tax credit
b. an increase in the capital gain tax
c. lower marginal income tax rates
d. an increase in the personal income tax rate for high-income individuals
Question 8The Federal Reserve System divides the U.S. into _____ districts.
a. 5
b. 21
c. 6
d. 12
e. 17
Question 9American consumers decide to boycott soccer balls made by Nike in support of a ban on child labor. Everything else being equal, the:
a. price of Nike soccer balls will rise.
b. supply of Nike soccer balls will fall.
c. quantity of Nike soccer balls supplied will fall.
d. demand curve for Nike soccer balls shifts to the right.
Question 10According to the supply-side view of fiscal policy, if the impact on tax revenues is the same, does it make any difference whether the government cuts taxes in a way that reduces marginal tax rates or in a way that does not reduce marginal tax rates?
a. No; both actions will exert the same impact on aggregate supply and demand.
b. Yes; only lower marginal tax rates will increase the incentive to earn income and thereby stimulate aggregate supply.
c. No; in both cases people will increase their saving in the expectation of higher future taxes and thereby offset the stimulus effect of lower taxes.
d. Yes; interest rates will increase if marginal tax rates are lowered, whereas they will tend to decrease if marginal tax rates are left unchanged.
Question 11The Federal Reserve System was created in 1913, through the Federal Reserve Act, by the:
a. U.S. President.
b. Judiciary.
c. Congress.
d. International Monetary Fund.
e. State governments.
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