Government purchases include government spending on:
A. government consumption goods and public capital goods.
B. government consumption goods only.
C. public capital goods only.
D. government consumption goods, public capital goods, and transfer payments.
A. government consumption goods and public capital goods.
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Price and total revenue move in opposite directions when demand is elastic
Indicate whether the statement is true or false
Suppose the equilibrium level of income exceeds the full employment level of income and there is high inflation. Hence, the government decides to implement a fiscal policy that will act to reduce national output and prices. This can be accomplished by:
a. increasing government spending such that aggregate expenditures are increased. b. raising taxes and government spending by the same amount such that aggregate supply is decreased and aggregate demand is increased. c. decreasing government spending such that aggregate demand is reduced. d. lowering average tax rates such that aggregate supply is increased. e. increasing transfer payments such that aggregate expenditures decline.
Which of the following examples illustrates a proportional income tax?
a. I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $1,000 in taxes. b. I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $500 in taxes. c. I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $800 in taxes. d. I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $1,200 in taxes.
Answer the following statements true (T) or false (F)
1. The problems of central planning become less complex as an economy grows in size over time. 2. Profits are the primary "success indicator" for firms in a centrally planned economy. 3. Quantitative measures of managerial success, such as production targets or quotas, are highly foolproof and are thus ideal to use in raising economic efficiency. 4. In the circular flow model, households act as buyers in the resource markets.