ECON 104 Study Guide - Transfer Payment, Aggregate Supply, Deficit Spending
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1. If government tax policy requires Jane to pay $28,000 in taxes on an annual income of $200,000 and Mary to pay $10,000 in tax on the annual income of $100,000, then the tax policy is:
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regressive. |
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progressive. |
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proportional. |
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optional. |
2. When increasing oil prices cause aggregate supply to shift to the left, then:
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unemployment and inflation decrease. |
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unemployment decreases and inflation increases. |
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unemployment and inflation increase. |
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unemployment increases and inflation decreases. |
3. What do goods like gasoline, tobacco, and alcohol typically share in common?
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A progressive tax is imposed on each of them. |
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A regressive tax is imposed on each of them. |
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They are all subject to government excise taxes. |
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They are all subject to government fiscal taxes. |
4. When inflation begins to climb to unacceptable levels in the economy, the government should:
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use contractionary fiscal policy to shift aggregate demand to the right. |
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use contractionary fiscal policy to shift aggregate demand to the left. |
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use expansionary fiscal policy to shift aggregate demand to the right. |
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use expansionary fiscal policy to shift aggregate demand to the left. |
Which of the following statement(s) about fiscal policy is/are true?
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A fiscal policy action to close a recessionary gap is to decrease taxes |
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Fiscal policy may require time before it takes effect (lags) |
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Expansionary fiscal policy can be achieved by increases in transfer payments and decreasing government purchases to pay for it. |
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One potential problem with using fiscal policy to close recessionary output gaps is that sustained government deficits can be harmful to long-run economic growth. |
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Fiscal policy may affect potential output as well as potential spending. |
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The choices of government spending have little effect on fiscal policy since government spending is tied directly to the business cycle through Y=C+I+G+NX. |
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A fiscal policy action to close an expansionary gap is to decrease government purchases |
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Balanced budget fiscal policy is more effective than borrowing or re-paying government debt. |