32) The Laffer curve A) slopes upward throughout its range since increasing tax

Question

32) The Laffer curve A) slopes upward throughout its range since increasing tax rates will always lead to increases in tax revenue. B) is horizontal because tax revenue is independent of the rate of interest. G) initially slopes upward as increasing tax rates lead to increasing tax revenue but eventually will slope downward as increasing tax rates lead to decreasing tax revenue. D) slopes downward throughout its range since increasing tax rates will always lead to decreases in tax revenue. 33) Fiscal policy to solve short-run economie problems supports the Keynesian notion of 33) A) an active government role in the economy B) the long-run nature of the economy C) there being no government role in the economy. D) the need for autocratic rule. 34) The liquidity of money refers to 34) A) the amount of gold it is backed by B) the standard of deferred payments and how quickly those payments can be made. C) how quickly it can be disposed of without high transaction costs. D) asymmetric information. 35) A) supervising member banks B) holding deposits of member banks C) providing for check collection and clearing D) making loans to college students 36) Between the years 1998 and 2001, the U.S. government experienced A) budget surpluses. C) budget deficits. B) balanced budgets. D) contractionary budget cycles One characteristic of built-in or automatic stabilizers is that 37) A) they reduce the size of the public debt during times of recession B) they require no new legislative action by Congress to have an effect C) they automatically produce surpluses during recessions and deficits during inflation. D) they have no effect on the distribution of income. 38) When government spending exceeds government revenues during a given period of time 38) A) a budget surplus exists. C) the national debt must be decreasing. B) Congress is obliged to raise taxes. D) a budget deficit exists. 39) The money supply in the United States is backed by 39) A) gold. B) platinum. Cfaith. D) silver. 40) Which of the following are lags that fiscal policy makers must cope with? 40) A) effect time lags ) recognition time lags ame lags B) action time lags D) All of the above are correct. B-5

Explanation / Answer

Answer.)

Q32.) C.) Initially slopes upward as increasing tax rates lead to increasing tax revenue but eventually will slope downward as increasing tax rates lead to decreasing tax revenues.

Q33.) A.) An active government role in the economy.

Q34.) C.) How quickly it can be disposed of without having high transaction costs.

Q35.) D.) Making loans to college students.

Q36.) A.) Budget balances.

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