Supply-side personal income tax cuts are expected to work by increasing work incentives. Which of the following explains why such tax cuts might not have the expected effect? O A. Workers may use their increased real income to purchase more leisure, and thus labor supply I will not increase. - B. Since there are rational expectations, it will be expected that tax cuts are only temporary. C. Workers do not respond to change in tax rates since they have to work anyway. D. Firms will invest more and replace workers with capital when there are income tax cuts. E. Firms will be able to reduce wages when income tax rates fall, since real wages are now higher.
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- 1Why low rate inflation is considered necessary for economic grwoth? Oa It does not affect the purchasing power of wages Ob. It indicates that the currency is in continuous demand by the people Oc taffects only the rich and not the poor Od itact as an incentive to boost in supply in the economy 2When the economy is in Keynesian macroeconomic equilibrium, planned investment is greater than actual investment. O a False O b. True 3Government fixes the floor and ceiling price which will not allow the producers to increase the price on their wish, this is a type of. O a Physical control called price pegging O b. Monetary policy control measures O. Physical control called price tagging Od. Fiscal policy control measures O e None 4Rising output coupled with falling prices is called stagflation O a. False O b. True 5The Value of marginal propensity to consume lies O a. O to 1 O b. Less than zero Oc -1 to 1 Od. Between O to 1 6The Central Bank way to control inflation is Oa Monetary policy…Imagine there is a consumption smoother (also known as a PIH consumer) who expectsto live for another 40 years and to work for another 30 years. They just learned thatthey will receive a permanent pay increase from their job of $800. How much extra dothey consume this year? What is their marginal propensity to consume?Suppose that the economy is presently operating at full employment. If there is an increase in national income, which of the following will occur automatically? O A. An increase in tax rates. O B. An increase in unemployment compensation spending. O C. An increase in tax revenues. O D. A decrease in tax rates.
- In the Aggregate Expenditure framework, which of the following government policy choices offer a possible solution to inflationary pressures? (Check all that apply.) Select all that apply: O a. A reduction in taxes for businesses that increase investment. O b. A major decrease in what the government spends on healthcare. Oc. A decrease in military spending. O d. A tax increase on consumer income. The United States is Canada's major export market. Suppose there is a decrease in American real GDP. The impact of this change will be a in which will mean a shift in the Canadian AE function. As a result, Canadian real GDP will decrease consumption investment upward downward net exports increaseQUESTION 2 Other things the same, when the price level rises, interest rates O a. fall, which means consumers will want to spend less on homebuilding. Ob.fall, which means consumers will want to spend more on homebuilding. O C. rise, which means consumers will want to spend more on homebuilding. Od.rise, which means consumers will want to spend less on homebuilding. QUESTION 3 Other things the same, if the price level rises by 2% and people were expecting it to rise by 5%, then some firms have O a. lower than desired prices, which depresses their sales. O b. lower than desired prices, which increases their sales. O. higher than desired prices, which increases their sales. d.higher than desired prices, which depresses their sales.Which of the following shocks would plausibly shift the quantity of automobiles supplied curve to the right? O A A revolution in drone technology allows for cheap, safe, reliable and convenient personal air travel. O B. Arevolution in materials allows cars to be built to their current specifications but for half the price. O C. Universal basic income is implemented increasing notably the wealth of every physical person over the age of 18. O D. The stock market collapses, wiping out billions of dollars in pension funds and personal savings.
- Real interest rate Supply, S Demand Loanable funds (billions of dollars per year) Which of the following is consistent with the graph depicted above? O A. The government starts taxing retirement accounts at a lower rate. O B. Firms' expectations are negative. OC. Higher taxes decrease the profitability of new investment. O D. Household income has increased. O E. Due to a change in habits, households begin to save less.Fluctuations in the economy caused by policymaker's manipulation of the economy for the purpose of affecting electoral outcomes is known as the O Income effect O Time inconsistency of policy O Discretionary effect O Substitution effect O Political cycleWhat would happen to output, employment, and the price level if the government increased spending on infrastructure, ceteris paribus? O Output would decrease, employment would decrease, and the price level would decrease O Output would decrease, employment would decrease, and the price level would increase O Output would decrease, employment would increase, and the price level would increase Output would increase, employment would increase, and the price level would decrease. O Output would increase, employment would increase, and the price level would increase Question 2(Multiple Choice Worth 5 points) (03.06 MC) Assume the price level is increasing, real GDP is decreasing, and the unemployment rate is increasing. Which event would explain this macroeconomic situation? OA positive supply shock OA negative supply shock A positive demand shock OA negative demand shock O insufficient data
- The equilibrium level of income determined by the equality of Aggregate Demand and Aggregate Supply indicate the full employment level. O a. False O b. Truedoes not increase output and employment but prices. O a. None of these O b. Inflationary gap O c. Deflationary gap O d. EquilibriumWhat is the formula for the marginal propensity to expend? A aggregate expenditures/A national income O b. A autonomous expenditures/A national income O a. O c. A consumption/A national income O d. A national income/A induced expenditures