During an economic expansion,
A) higher income tax revenues tend to automatically increase a budget deficit or reduce a budget surplus.
B) higher income tax revenues tend to automatically increase a budget surplus or reduce a budget deficit.
C) lower income tax revenues tend to automatically increase a budget deficit or reduce a budget surplus.
D) lower income tax revenues tend to automatically increase a budget surplus or reduce a budget deficit.
Answer: B) higher income tax revenues tend to automatically increase a budget surplus or reduce a budget deficit.
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What could explain why a decrease in taxes could lead to a less-than proportionate increase in output ?
A. Consumers may choose to save much of the tax cut in anticipation of having to pay higher taxes in the future. B. As a result of diminishing returns to current consumption, consumers may choose to spread the extra spending over the long term rather than consuming the proceeds of a tax cut all at once. C. A decrease in taxes will necessitate lower government outlays, thus largely offsetting the higher consumption expenditures of households. D. All of the above. E. A and B only
Which of the following examples shows the problem of using physical units as the measure of total economic activity?
a. Milk is measured by gallons; milk is paid for with dollars. b. Milk is measured by gallons; train travel is measured by miles. c. A gallon of milk weighs more than a gallon of water. d. A plane covers more mph than a train does.
If the demand for mushrooms increases while the supply remains unchanged, this will result in
A. a shortage of mushrooms as the market price remains unchanged. B. an increase in the quantity of mushrooms sold and an increase in their price. C. an increase in the quantity of mushrooms sold but no change in price. D. a decrease in the quantity of mushrooms sold and an increase in their price.
An adverse supply shock would
A. shift the production function up and increase marginal products at every level of employment. B. shift the production function down and decrease marginal products at every level of employment. C. shift the production function down and increase marginal products at every level of employment. D. shift the production function up and decrease marginal products at every level of employment.