"Lower marginal tax rates encourage people to work, save, and invest, resulting in more output and a larger tax base." This statement most closely reflects which of the following schools of economic thought?
A. Keynesian
B. Adam Smithian
C. Marxist
D. Supply-side economics
Answer: D
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Which of the following schematics most accurately represents economic fluctuations during a business cycle?
A) Shock -> Spending response by households and firms -> Multiplier effect -> Change in real GDP B) Shock -> Multiplier effect -> Spending response by households and firms -> Change in real GDP C) Shock -> Multiplier effect -> Change in real GDP -> Spending response by households and firms D) Shock -> Change in real GDP -> Spending response by households and firms -> Multiplier effect
The best way to evaluate the effect of a specific tax is _____
a. to consider the tax in isolation b. to consider the tax in the context of the entire tax system c. to consider whether a tax is progressive, regressive, or proportional d. a and c
A market economy depends on market mechanisms to: a. determine the most efficient way of using resources
b. determine how large the government's budget deficit should be. c. decide how much government regulation there should be. d. provide everyone with a minimum level of income.
According to the Taylor rule, the Fed should:
a. lower the fed funds rate by 2.0% if inflation rises 1.0% above its target of 1.0%. b. raise the fed funds rate by 2.0% if inflation rises 1.0% above its target of 1.0%. c. lower the fed funds rate by 0.5% if inflation rises 1.0% above its target of 2.0%. d. raise the fed funds rate by 0.5% if inflation rises 1.0% above its target of 2.0%.