Question 1

Suppose the government of a small island country does not currently have any automatic stabilizers in place but they decide to implement them with the expectation of an impending recession. Which of the following would be most effective?

Accepted Answer

An unemployment compensation program is the most effective automatic stabilizer in the given scenario. During a recession, unemployment rates tend to rise, which decreases consumer spending and can further exacerbate the economic downturn. By having an unemployment compensation program in place, the government can provide financial assistance to those who have lost their jobs, helping to maintain consumer spending. This can help to stabilize the economy in times of recession. Option A (4-year term for president) is not an automatic stabilizer and would have no direct impact on the economy. Option B (property taxes) may be useful in increasing government revenue, but will not have a direct impact on stabilizing the economy during a recession. Option D (infrastructure investment) may have positive long-term effects on the economy, but it is not an automatic stabilizer and does not provide immediate relief during a recession.

Question 2

Exhibit 11-8 Aggregate demand and supply curves In Exhibit 11-8, supply-siders claimed that the shift from AS₁ to AS₂ would occur if the government:

Accepted Answer

The shift from AS₁ to AS₂ would occur if the government decreased tax rates and decreased the amount of government regulation. This is because a decrease in tax rates would lead to more disposable income for individuals and businesses, increasing their willingness to spend and invest, which would shift the aggregate demand (AD) curve to the right. Additionally, a decrease in government regulation would reduce the cost of production and incentivize businesses to produce more, which would shift the aggregate supply (AS) curve to the right. Together, this would result in an increase in both real GDP and price level, leading to the new equilibrium point at a higher price level and higher output level.

Question 3

When both inflation and unemployment are concerns, supply-side economists argue in favor of policies to shift the

Accepted Answer

Supply-side economists focus on policies that increase production and efficiency, shifting the aggregate supply curve to the right, which can lower the Consumer Price Index (CPI) by making more goods and services available at lower prices. In contrast, Keynesian fiscal policy typically involves stimulating demand (shifting the aggregate demand curve to the right), which can increase the CPI by increasing the demand for goods and services.

Question 4

Supply-side economists:

Accepted Answer

Supply-side economists were influential in President Reagan's decision to change the tax structure by advocating for policies that promoted economic growth through tax cuts and deregulation. They believed that lowering taxes would incentivize businesses to invest in the economy and create jobs, ultimately leading to increased government revenue through higher economic activity.

Question 5

The school of economic thought which argues that through tax reductions, and deregulation, government creates the proper incentives for the private sector to increase aggregate supply is known as the:

Accepted Answer

The supply-side school argues that tax reductions and deregulation create incentives for the private sector to increase aggregate supply. This approach emphasizes the role of production and supply in driving economic growth, and is often associated with conservative or right-leaning policies. Rational expectations, neo-Keynesian, and classical schools of thought have different views on economic policy and macroeconomic analysis.

Question 6

Which of the following is emphasized by supply-side economics?

Accepted Answer

Supply-side economics emphasizes the effect of marginal tax rates on aggregate supply by arguing that lower tax rates will increase incentives for work, innovation, and investment, leading to higher economic growth and increased tax revenue in the long run.

Question 7

Supply-side economics is based on the theory that:

Accepted Answer

Supply-side economics is based on the idea that increases in aggregate supply, such as through tax cuts and deregulation, will lead to lower prices and increased economic growth. This theory emphasizes the importance of promoting production and investment to stimulate economic activity.

Question 8

According to supply-side economists, lowering corporate income taxes:

Accepted Answer

According to supply-side economists, lowering corporate income taxes stimulates investment, which creates an increase in economic growth. This theory is rooted in the idea that lower taxes can incentivize businesses to innovate, expand operations, and create new jobs, resulting in an uptick in economic activity.

Question 9

"Lower marginal tax rates encourage people to work, save, and invest, resulting in more output and a larger tax base." This statement most closely reflects which of the following schools of economic thought?

Accepted Answer

The statement is in line with the principles of supply-side economics, which advocates for lower tax rates to boost economic growth and investment. This school of thought believes that reducing taxes on businesses and individuals will incentivize them to work harder and invest more, which will increase economic output and eventually lead to a larger tax base.

Question 10

Supply-siders' policy recommendations include:

Accepted Answer

Supply-siders believe in cutting taxes, decreasing government regulation, and lowering resource prices to stimulate economic growth. Therefore, the best choice is B as it includes all three of these policy recommendations.

Question 11

Those who favor government policies to stimulate the economy by creating incentives for individuals and businesses to increase their productive efforts are supporting:

Accepted Answer

Supply-side economics focuses on reducing taxes and decreasing regulation to encourage production, investment, and ultimately, economic growth. This approach believes that lower barriers for people and businesses enhance their productive efforts.

Question 12

Supply-side policy suggests that if we _______ taxes of workers, the _________ labor will increase, causing equilibrium wages to ________.

Accepted Answer

The answer of Supply-side policy suggests that if we _______...

Question 13

Which of the following groups believes that the economy can achieve full employment without inflation through tax reductions, lower resource prices, and deregulation?

Accepted Answer

The supply-side school believes that economic growth and full employment can be achieved through tax reductions, lower resource prices, and deregulation. They argue that these policies will stimulate production and supply, leading to economic expansion and job creation without causing inflation.

Question 14

An advocate of supply-side fiscal policy would advocate which of the following?

Accepted Answer

Advocates of supply-side fiscal policy believe that reducing taxes on businesses and individuals will lead to increased economic growth, investment, and job creation. Therefore, the reduction in taxes is the best choice. The other options (A, B, and C) are not in line with supply-side fiscal policy.

Question 15

"Tax cuts, by providing incentives to work, save, and invest, will raise employment and lower the price level." This argument is made by the:

Accepted Answer

This argument is made by supply-side economists who emphasize the importance of reducing tax rates to stimulate economic growth, by providing individuals and businesses with greater incentives to work, save, and invest. Supply-side economics holds that by cutting taxes, the economy will be stimulated, leading to increased economic activity and greater tax revenues in the long run.

Question 16

Appropriate supply-side policy (or policies) during a recession would be to do which of the following?

Accepted Answer

During a recession, businesses may be struggling and reducing costly regulations can help them operate more efficiently and increase production. This can have a positive effect on the economy by creating jobs and stimulating growth. Increasing taxes on businesses or reducing government transfer payments may have a negative impact on the economy by reducing consumer spending and inhibiting growth. While increasing government spending may provide temporary relief, it may also lead to long-term economic issues such as inflation and increased debt.

Question 17

Which of the following policies is a supply-side policy?

Accepted Answer

Subsidies to produce technological advances are examples of supply-side policies as they aim to increase the productivity and efficiency of the production process, leading to an increase in the supply of goods and services. Higher taxes and increase in regulation are demand-side policies as they aim to decrease consumption and demand. Increase in resource prices does not necessarily fall under either supply-side or demand-side policies as it can have mixed effects on both.

Question 18

According to supply-side fiscal policy, reducing tax rates on wages and profits will:

Accepted Answer

According to supply-side fiscal policy, reducing tax rates on wages and profits will increase the incentive to work and invest, which will lead to an increase in production and output. This will ultimately lead to a reduction in both unemployment and inflation, as more people are employed and there is an increase in the supply of goods and services. Therefore, choice D is the correct answer.

Question 19

On a graph showing the influence of automatic stabilizers on the economy, government expenditures on transfer payments and real GDP have a(n):

Accepted Answer

The answer of On a graph showing the influence of...

Question 20

Supply-side economics calls for:

Accepted Answer

Supply-side economics argues that lower taxes on businesses and individuals will incentivize them to produce more and therefore increase the supply of goods and services in the economy. This increase in supply is believed to lead to economic growth and job creation. The other options (B, C, and D) are more associated with demand-side economics, which focuses on increasing consumer spending and government intervention to stimulate the economy.

Quiz 21: Fiscal Policy

Suppose the government of a small island country does not currently have any automatic stabilizers in place but they decide to implement them with the expectation of an impending recession. Which of the following would be most effective?

Exhibit 11-8 Aggregate demand and supply curves In Exhibit 11-8, supply-siders claimed that the shift from AS₁ to AS₂ would occur if the government:

When both inflation and unemployment are concerns, supply-side economists argue in favor of policies to shift the

Supply-side economists:

The school of economic thought which argues that through tax reductions, and deregulation, government creates the proper incentives for the private sector to increase aggregate supply is known as the:

Which of the following is emphasized by supply-side economics?

Supply-side economics is based on the theory that:

According to supply-side economists, lowering corporate income taxes:

"Lower marginal tax rates encourage people to work, save, and invest, resulting in more output and a larger tax base." This statement most closely reflects which of the following schools of economic thought?

Supply-siders' policy recommendations include:

Those who favor government policies to stimulate the economy by creating incentives for individuals and businesses to increase their productive efforts are supporting:

Supply-side policy suggests that if we ___ taxes of workers, the _ labor will increase, causing equilibrium wages to ____.

Which of the following groups believes that the economy can achieve full employment without inflation through tax reductions, lower resource prices, and deregulation?

An advocate of supply-side fiscal policy would advocate which of the following?

"Tax cuts, by providing incentives to work, save, and invest, will raise employment and lower the price level." This argument is made by the:

Appropriate supply-side policy (or policies) during a recession would be to do which of the following?

Which of the following policies is a supply-side policy?

According to supply-side fiscal policy, reducing tax rates on wages and profits will:

On a graph showing the influence of automatic stabilizers on the economy, government expenditures on transfer payments and real GDP have a(n) :

Supply-side economics calls for:

Quiz 21: Fiscal Policy

Suppose the government of a small island country does not currently have any automatic stabilizers in place but they decide to implement them with the expectation of an impending recession. Which of the following would be most effective?

Exhibit 11-8 Aggregate demand and supply curves In Exhibit 11-8, supply-siders claimed that the shift from AS1 to AS2 would occur if the government:

When both inflation and unemployment are concerns, supply-side economists argue in favor of policies to shift the

Supply-side economists:

The school of economic thought which argues that through tax reductions, and deregulation, government creates the proper incentives for the private sector to increase aggregate supply is known as the:

Which of the following is emphasized by supply-side economics?

Supply-side economics is based on the theory that:

According to supply-side economists, lowering corporate income taxes:

"Lower marginal tax rates encourage people to work, save, and invest, resulting in more output and a larger tax base." This statement most closely reflects which of the following schools of economic thought?

Supply-siders' policy recommendations include:

Those who favor government policies to stimulate the economy by creating incentives for individuals and businesses to increase their productive efforts are supporting:

Supply-side policy suggests that if we _______ taxes of workers, the _________ labor will increase, causing equilibrium wages to ________.

Which of the following groups believes that the economy can achieve full employment without inflation through tax reductions, lower resource prices, and deregulation?

An advocate of supply-side fiscal policy would advocate which of the following?

"Tax cuts, by providing incentives to work, save, and invest, will raise employment and lower the price level." This argument is made by the:

Appropriate supply-side policy (or policies) during a recession would be to do which of the following?

Which of the following policies is a supply-side policy?

According to supply-side fiscal policy, reducing tax rates on wages and profits will:

On a graph showing the influence of automatic stabilizers on the economy, government expenditures on transfer payments and real GDP have a(n) :

Supply-side economics calls for:

Exhibit 11-8 Aggregate demand and supply curves In Exhibit 11-8, supply-siders claimed that the shift from AS₁ to AS₂ would occur if the government:

Supply-side policy suggests that if we ___ taxes of workers, the _ labor will increase, causing equilibrium wages to ____.