If tax rates are cut, one might expect to observe an increase in the budget deficit. Supply-siders question this observation, arguing that
A. this is a price that must be paid for a more equitable tax system.
B. when taxes are cut, expenditures must also be cut.
C. a decrease in the tax rate may actually generate an increase in tax revenues.
D. tax wedges will make up the difference.
C. a decrease in the tax rate may actually generate an increase in tax revenues.
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When real GDP equals potential GDP, the quantity theory of money says that an increase in the quantity of money brings an equal percentage
A) decrease in real GDP. B) decrease in velocity. C) decrease in the price level. D) increase in the price level. E) increase in real GDP.
Congress created the Federal Reserve System
A) to serve as a lender of last resort. B) to process the receipt of taxes received by the Internal Revenue Service. C) to regulate the value of the U.S. dollar against foreign currencies. D) to provide a source of mortgage loans to the residential housing market.
The federal funds rate is:
a. the minimum amount of reserves the Fed requires a bank to hold. b. the interest rate that the Fed charges banks who borrow from it. c. the interest rate on loans made by banks to other banks d. the maximum percentage of the cost of a stock that can be borrowed from a bank, with the stock offered as collateral. e. an appeal by the Fed to banks, asking for voluntary compliance with the Fed's wishes.
Which of the following best describes how a perfectly competitive industry would respond to a sudden increase in popularity of the product? The market demand curve would shift to the right, leading to:
A. no change in the short-run equilibrium price, and a higher long-run equilibrium quantity. B. a higher equilibrium price in the short run and entry into the market in the long run. C. a higher equilibrium price in the short run and a permanent increase in economic profit. D. a lower short-run equilibrium price due to the entry of firms into the market.