Critics of the supply-side tax cuts proposed by the Reagan administration argued that lower taxes would:
a. increase the budget deficit.
b. decrease money supply in the economy.
c. reduce the aggregate price level.
d. reduce the disposable income of households.
e. reduce the volume of international trade.
Question 2As a result of an increase in a product's price:
a. product supply increases.
b. product supply decreases.
c. product supply does not change, but quantity supplied increases.
d. the impact on product supply is uncertain. Economic theory has no answer to this question.
Question 3When there is a recessionary gap:
a. Real output exceeds the natural level of real output.
b. Real output equals the natural level of real output.
c. Real output is less than the natural level of real output.
d. Any of the above is possible.
Question 4The emphasis on the greater incentives to produce, created by lower taxes, has come to be known as:
a. the trickle-down economics.
b. the supply-side economics.
c. the paradox of thrift.
d. the permanent income hypothesis.
e. monetarism.
Question 5Each point on the supply curve shows the:
a. amount that people want to buy at that price.
b. quantity supplied at that price.
c. productive capacity of an individual producer.
d. the amount producers want to sell to buyers of different income levels.
Question 6Which of the following is true when there is a recessionary gap?
a. Real output exceeds the natural level of real output.
b. Unemployment exceeds the natural rate of unemployment.
c. Employment exceeds full employment.
d. All of the above are true when there is a recessionary gap.
Question 7If government spending in a country declines by 10 billion and, at the same time, taxes increase by an equal amount, what is the total effect in the economy?
a. Equilibrium real GDP increases
b. Equilibrium real GDP increases by 20 billion
c. Equilibrium real GDP is unchanged
d. Equilibrium real GDP decreases by more than 10 billion and less than 20 billion
e. Equilibrium real GDP decreases by more than 20 billion
Question 8A supply schedule shows:
a. projected sales as ad spending varies.
b. how many units producers are willing and able to sell at various prices.
c. possible combinations of output as input prices vary.
d. how many units consumers would like to buy at various prices.
Question 9When there is an inflationary gap:
a. Unemployment exceeds the natural rate of unemployment.
b. Unemployment equals the natural rate of unemployment.
c. Unemployment is less than the natural rate of unemployment.
d. Any of the above is possible.
Question 10Which of the following is not a means of financing government spending?
a. Government subsidies
b. Personal income taxes
c. Printing new money
d. Issuing government bonds
e. Capital gains taxes
Question 11An upward-sloping supply curve shows that:
a. buyers are willing to pay more for particularly scarce products.
b. suppliers expand production as the product price falls.
c. suppliers are willing to increase production of their goods if they receive higher prices for them.
d. buyers are willing to buy more as the product price falls.
e. buyers are not affected either directly or indirectly by the sellers' costs of production.
Question 12When there is an inflationary gap:
a. Employment exceeds full employment.
b. Employment equals full employment.
c. Employment is less than full employment.
d. Any of the above is possible.
Question 13Government spending equals the sum of _____, _____, and _____.
a. taxes; changes in the reserves of the central bank; changes in net exports
b. taxes; change in government debt; change in government-issued money
c. taxes; public expenditures; private deductible expenditures
d. public expenditures; business investment; change in government debt
e. public debt; welfare expenditures; social security expenditures
Question 14The quantity supplied of a good is the amount that
a. buyers are willing and able to purchase.
b. sellers are able to produce.
c. buyers and sellers agree will be brought to market.
d. sellers are willing and able to sell.
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