According to Keynesian theory, the most important determinant of saving and consumption is
A. the returns on stocks and bonds
B. the level of real disposable income.
C. the stock of liquid assets.
D. the level of consumer indebtedness.
Answer: B
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If taxes are cut, there is
A) an increase in aggregate demand and the AD curve shifts rightward. B) a decrease in aggregate demand and the AD curve shifts leftward. C) an increase in the quantity of real GDP demanded and a movement up along the AD curve. D) a decrease in the quantity of real GDP demanded and a movement down along the AD curve. E) no change in aggregate demand, only a change in potential GDP.
Refer to Figure 11.3. Assume aggregate demand is represented by AD3 and full-employment output is $5.6 trillion. The equilibrium level of income is
A. $6.0 trillion. B. $0.8 trillion. C. $5.6 trillion. D. $5.2 trillion.
As the economy expands, the collection of personal income tax revenues automatically rises. This relationship best describes how the progressive income tax system:
A. increases crowding out in the economy. B. offsets the timing problem for fiscal policy. C. decreases real interest rates in the economy. D. provides built-in stability for the economy.
What determines tax revenues?
A. the income tax rate B. the rate of inflation C. the money supply in the economy D. the rate of interest