If the marginal propensity to consume is equal to 0.8, the addition of $60 billion in aggregate expenditure will increase national income by
a. $48 billion
b. $300 billion
c. $60 billion
d. $18.8 billion
e. $108 billion
B
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The major difficulty with using a tax on pollution instead of a fixed percentage reduction regulation is:
A. that it only works in theory. B. that firms would not pay the tax. C. establishing the optimal size of the tax. D. that it would cause prices to rise.
Based on the figure below. Starting from long-run equilibrium at point C, a tax cut that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies. 
A. D; C B. B; C C. B; A D. D; B
Which of the following policies is likely to generate the smallest increase in national saving?
A) an increase in income taxes B) an increase in consumption taxes C) a cut in government transfer payments D) None of the above policies will increase national saving.
Ralph earns $40,000 per year. According to the income tax schedule, he must pay $4,000 in income taxes this year. If he had earned $50,000 his tax liability would have been $6,000. What marginal tax rate does Ralph face?
A. 10 percent B. 12 percent C. 20 percent D. 66 percent