Chapter 15 Fiscal Policy

| November 9, 2018

15)
Recall the application. One solution proposed to deal with the rising expenses
of government entitlement programs is to raise taxes. An increase in taxes to
help cover the rising expenses of entitlement programs would
A)
increase aggregate demand, shifting the AD curve to the right.
B)
increase aggregate demand, shifting the AD curve to the left.
C)
decrease aggregate demand, shifting the AD curve to the right.
D)
decrease aggregate demand, shifting the AD curve to the left.

16)
Recall the application. One strategy proposed to deal with the rising expenses
of government entitlement programs is for the government to save and invest now
so as to reduce the burden on future generations. This strategy would
A)
increase GDP, and entitlement programs would increase along with GDP.
B)
increase GDP and entitlement programs would decrease.
C)
increase GDP and eliminate entitlement programs.
D)
not change GDP, but shrink entitlement programs.

17)
Recall the application. Which of the following is NOT a strategy that the
government can pursue to address the rising cost of federal retirement and
health care programs?
A)
reform the health care system to encourage more competition to reduce health
care expenditures
B)
increase the age at which retirement benefits begin to be paid
C)
borrow from the public to finance the programs
D)
promote government saving and investment to increase real GDP over time

18)
A White House proposal to lower business taxes by increasing tax deductions is
an example of
A)
expansionary fiscal policy.
B)
contractionary fiscal policy.
C)
automatic stabilization.
D)
progressive taxation.

19)
Which of the following sources of revenue is used to fund government spending?
A)
interest
B)
taxation
C)
corporate contributions
D)
political party contributions

20)
Individual income tax is the ________ single component of federal revenue.
A)
largest
B)
second largest
C)
smallest
D)
least important

21)
The share of corporate tax in total federal revenues
A)
is larger than the other components of federal revenue.
B)
is the smallest of all the components of federal tax revenue.
C)
has declined over the past few decades to a relatively low level.
D)
has grown significantly in each of the past 10 years.

22)
Special taxes levied on earnings for Social Security and Medicare are called
A)
withholding tax on wages.
B)
social insurance tax.
C)
unfair tax on low-income families.
D)
an exception tax for corporations.

23)
Proponents of the estate and gift tax argue that the tax is necessary because
A)
it generates a large portion of total federal revenue.
B)
it prevents “unfair” accumulation of wealth across generations.
C)
it is only applied to items that have not previously been taxed.
D)
it is the primary source of funding for Medicare and Medicaid.

24)
One school of thought that emphasizes the role that taxes play in an economy’s
supply of output is known as
A)
demand-pull economics.
B)
classical economics.
C)
tax-and-spend economics.
D)
supply-side economics.

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