7. \"Both research groups said last week that the deficit has bottomed out and w

Question

7. "Both research groups said last week that the deficit has bottomed out and will begin to rise next year. They predicted economic growth would slow this year to 2.5 percent in real terms, from a robust 3.7 percent last year." Which of the following statements is reasonable in this context? A. growth has nothing to do with the deficit B. the fall in the deficit caused the high growth C. the predicted fall in growth is the reason the deficit is predicted to rise D. the predicted rise in the deficit is the reason growth is predicted to fall 8. An economy's self-correcting mechanisms A. are non-existent B. correct economic expansions more easily than recessionary contractions. C. correct recessionary contractions more easily than economic expansions. D. work equally well/poorly for both contractions and expansions. E. None of the above. 9. "Supply-side economics, packaged and popularized as 'Reaganomics,' has become a big deal in the current policy debate over the fight against stagflation. To counteract this phenomenon of persistent high inflation, unemployment and stagnant growth, supply-side policies emphasize increasing production to take the pressure off prices." How would this policy be reflected on an AS/AD diagram? A. the AS curve shifts left B. the AD curve shifts right C. the AS curve shifts right D. the AD curve shifts left 10. If we are at the natural rate of unemployment, an increase in aggregate demand will lower unemployment in the short run A. regardless of workers' price rise estimate B. if workers overestimate the consequent price rise C. if workers underestimate the consequent price rise D. if workers perfectly anticipate the consequent price rise 11. Which of the following would not be considered a supply-side tax cut? A. a $100 per person tax reduction B. reduced tax rates on interest income C. faster capital depreciation allowances (a tax write-off for firms) D. reduction in the rate of tax on capital gains 12. "It seems that Americans prefer to cut down on their saving to maintain living standards; the catch is that a low saving rate makes it harder to increase living standards." Low saving makes it harder to increase living standards because it causes A. high taxes B. low investment C. low consumption D. low government spending 13. "The Reagan people are currently arguing over what level of tax cuts should be implemented. What if they're wrong? What if the supply side doesn't respond enough to at least take care of the foregone revenues?" What is the implication of the supply side not responding enough to take care of the foregone revenues? A. lower output B. higher inflation C. higher budget deficit D. higher unemployment 14.

Explanation / Answer

b d b a a b b d c c b d a b c b d a a c d b a c

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