Which of the following propositions would a proponent of supply-side economics be most likely to stress?
a. Higher marginal tax rates will lead to a reduction in the budget deficit and lower interest rates, because they expand government revenues.
b. Higher marginal tax rates promote economic inefficiency and thereby retard aggregate output, because they encourage investors to undertake low-productivity projects with substantial tax-shelter benefits.
c. Income redistribution payments will exert little impact on real aggregate supply, since they do not consume resources directly.
d. A tax reduction will increase the disposable income of households. Thus the primary impact of a tax reduction on aggregate supply will stem from the influence of the tax change on the size of the budget deficit or surplus.
b
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Initially, the creation of railroads was opposed in some countries because:
A) it was likely to increase poverty. B) it was likely to increase the cost of trade. C) it was likely to provide more power to monarchs and rulers. D) it was likely to initiate creative destruction.
An increase in the expected inflation rate will
A) shift the short-run Phillips curve to the right. B) reduce the inflation rate. C) shift the short-run Phillips curve to the left. D) reduce the unemployment rate.
As the level of competition in an industry increases, the price-cost margin approaches:
A) 0. B) 1. C) 10. D) infinity.
Small-denomination time deposits refer to certificates of deposit with a denomination of less than
A) $1,000. B) $10,000. C) $100,000. D) $1,000,000.