ECON 2305/ECON2305 - EXAM 4 ALL ANSWERS 100% CORRECT FALL-2021/2022 EDITION GUARANTEED GRADE A+

1. The largest source of revenue for the federal government is a. sales tax receipts b. individual income tax receipts c. corporate income tax receipts d. Social Security tax receipts 2. If the government enacts a tax on Uber corporate profits, which of the following is likely to occur? a. Uber riders will pay the tax in the form of higher fares. b. Uber drivers will pay the tax in the form of lower wages c. Uber shareholders will pay the tax in the form of reduced profit d. the tax will be shared by Uber shareholders, Uber riders, and Uber drivers 3. When the U.S. government sells a treasury it promises to pay that money back, with interest, to the purchaser at some future date. a. True b. False 4. A trade deficit occurs when we export more than we import a. True b. False 5. If regardless of an individual's income, the tax bill comprises exactly the same proportion, the tax is a. progressive b. proportional c. regressive 6. In reality, the doesn't change when tax rates change. a. True b. False 7. If, as income increases, a smaller percentage of additional income is paid as taxes, the tax is a. progressive b. proportional c. regressive 8. The economic incidence of a tax is always felt by the party with the legal tax incidence. a. True b. False 9. Government spending increases will shift the AD curve rightward since G is part of this equation: AD = C+ I + G + Ex - Im. a. True b. False 10. Which set of economists is more likely to view this as a temporary state of affairs? a. classical economists b. Keynesians 11. Assume that the recessionary gap is $10 billion and the multiplier 6. By how much should government spending change, according to the Keynesians? a. $0.16 billion b. S60 billion c. $4 billion d. $10 billion e. $1.66 billion 12. If the AD curve shifts leftward, leading to a recessionary gap, what's most likely to happen next, according to the Keynesians? a. wage rates will rise quickly. so no government intervention will be necessary b. wage rates will fall quickly, so no government intervention will be necessary c. the government will have to increase government spending and/or cut taxes to get the AD curve to shift rightward d. the government will have to decrease government spending and/or raise taxes to get the AD curve to shift 13. If the economy moves from point E1 to point E2, as seen on this graph, Keynesians would recommend a. increasing government spending and/or increasing taxes b. doing nothing because the economy will fix itself quickly c. cutting marginal tax rates and/or reducing regulatory impediments to business d. reducing government spending and/or increasing taxes e. increasing government spending and/or reducing taxes f. reducing government spending and/or reducing taxes 14. Classical economists believe that the government should increase or lower spending in the economy so that total spending exactly matches real GDP potential a. True b. False //This belief is more likely to be held by Keynesians. 15. Which group of economists believes that we can get stuck in the state shown in this circular flow diagram, where the product markets are in equilibrium but the resource markets aren't in equilibrium? a. classical economists b. Keynesians 16. If a multiplier effect occurs, a relatively small change in government spending will trigger a larger change in equilibrium real GDP a. false b. true 17. When the SRAS curve is flat (like John Maynard Keynes assumed), fiscal policy intervention causes both the price level and output to change. a. True b. False 18. Saving your money in a piggy bank, under your mattress, or in a home safe has the same effect on the economy as saving your money in a financial market. a. True b. False 19. The cumulative fiscal multiplier seems to be close to 0. This means that a $1 increase in government spending leads to essentially no change in real GDP. a. True b. False 20. Crowding out effects make government intervention less effective than it would otherwise be.