What are the tools of supply-side economic policy and how did the supply-siders think that these tools could be used to stimulate the economy?
Taxes, government regulation, and government spending are the three tools of supply-side economic
policy. Supply-siders believe that lower tax rates, less government regulation, and less government
spending would stimulate economic growth. As well, lower tax rates would provide stronger incentives to
work and produce, by increasing after-tax wages and profits. Less government regulation would reduce
production costs, spurring profits and production. They also believe that government spending crowds out
private sector investment by driving up the interest rate and by providing private investors with more
competition in the securities market.
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Tariffs ________ a deadweight loss and import quotas ________ a deadweight loss
A) create; create B) do not create; create C) create; do not create D) do not create; do not create
Since an individual spends a small share of the income on salt, the elasticity of demand is likely to be low.
Answer the following statement true (T) or false (F)
The majority of transactions in foreign exchange markets involve ________
A) transactions one the New York Stock Exchange B) exchanging one set of physical notes for another C) exchanging bank deposits denominated in different currencies D) buying and selling Treasury securities
Economists attribute the high Gini coefficients among less-developed countries primarily to their
a. predominantly agricultural economies b. unstable political systems c. inadequate transportation systems d. large untapped natural resources e. proximity to industrial economies