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When the government levies a $100 million tax on people’s income and puts the $100 Diff; 3 million back into the economy in the form of a spending program such as new inter

 When the government levies a $100 million tax on people’s income and puts the $100
Diff; 3                            million back into the economy in the form of a spending program such as new interstate
                            highway construction, the

a.tax multiplier magnifies the effect of taxes on the level of national income

b.tax, then, generates a $100 million decline in national income

c.level of national income expands by $100 million

d.effect on national income is uncertain

e.tax multiplier overpowers the income multiplier, triggering a rollback in national
income

72.              An economy that is in equilibrium and operating below its full-employment capacity
                            must be experiencing a(n)

a.inflationary period

b.recessionary gap

c.a surplus budget outcome

d.market correction

e.inflationary gap

73.              Unemployment that results from fundamental technological changes in production,
                            or from the substitution of new goods for customary ones, is

a.the natural rate of unemployment

b.not counted as detracting from full employment

c.cyclical unemployment

d.frictional unemployment

e.structural unemployment

74.              Unemployment caused by people voluntarily quitting work in order to seek more
                            attractive employment is

a.the natural rate of unemployment

b.not considered part of the unemployment

c.cyclical unemployment

d.frictional unemployment

e.structural unemployment

75.              Who among the following benefits from inflation?

a.Patrick Roy who borrowed $10,000 from a bank to pay the downpayment on a house
he bought in Denver

b.The Denver National Bank who provided Patrick Roy with the $10,000 to make the
downpayment

c.Jerry Swanson, a landlord who holds a 5-year lease on an apartment rented to
students off campus at the University of Arizona

d.Peter Schran who loaned Larry Neal $500 without charging Larry any interest

e.Ian McDonald who is retired and lives on his $700 per week pension

76.              Assume that an economy’s income multiplier is 4. If this economy is in equilibrium at
                            $2,000 billion, then which one of the following actions will bring it to a full employment
                            equilibrium without inflation of $1,500 billion?

a.$500 billion spending cut

b.$500 billion spending increase

c.$125 billion spending cut

d.$125 billion spending increase

e.$2,000 billion spending cut

77.              Assume that an economy’s income multiplier is 2 and that this economy is in equilibrium
                            at $500 billion. If the government wants to move this economy to full-employment at
                            $600 billion, while maintaining a balanced budget, it must choose which of the following
                            options?

a.increase government spending and taxes by $100 billion

b.decrease government spending and taxes by $100 billion

c.increase government spending and taxes by $200 billion

d.decrease government spending and taxes by $200 billion

e.raising the equilibrium level of income while maintaining a balanced budget is impossible

78.              Imagine that the U.S. economy is in equilibrium at full employment without inflation
                            where national income is at $6,700 billion. The MPC = 0.8. If massive flooding along the
                            Mississippi River leads Congress to approve a spending package of $10 billion to aid
                            flood victims, the government must also take which of the following actions to keep the
                            economy in equilibrium at full employment without inflation?

a.increase taxes by $10 billion

b.decrease taxes by $10 billion

c.cut other government spending programs by $7.5 billion

d.increase taxes by $12.5 billion

e.decrease taxes by $12.5 billion

79.              Imagine that the U.S. economy is in equilibrium at full employment without inflation
                            where national income is at $6,700 billion. The MPC = 0.8. If massive flooding along the
                            Mississippi River leads Congress to approve a spending package of $10 billion to aid
                            flood victims, the government must also take which of the following actions to keep the
                            economy in equilibrium at full employment without inflation?

a.increase taxes by $10 billion

b.decrease taxes by $10 billion

c.increase taxes by more than $10 billion

d.decrease taxes by more than $10 billion

e.increase taxes by less than $10 billion

80.              A $100 increase in both government expenditure and taxes will

a.cancel each other out so that the equilibrium level of output will remain unchanged

b.lead to a $100 decrease in the equilibrium level of output

c.lead to a $100 increase in the equilibrium level of output

d.lead to a greater than $100 increase in the equilibrium level of output

e.lead to a less than $100 increase in the equilibrium level of output

Feb 11 2020 View more View Less

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