978-1259723223 Test Bank TBChap038 Part 7

194.

Refer to the graph. What events would tend to temporarily move the economy from point B2

to C2?

195.

Refer to the graph. The economy is at point B2, and then aggregate demand increases. In the

short run, the economy will

196.

The automatic adjustment mechanism that makes the economy move toward the long-

run Phillips Curve is

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B.

inflation expectations and wage adjustments.

C.

contractionary fiscal or monetary policy.

D.

increases in productivity over time.

197.

The long-run Phillips Curve is vertical at

198.

In the short run, if the actual rate of inflation falls lower than the expected rate, then

199.

The short-run Phillips Curve assumes an unchanging

200.

If the expected rate of inflation rises, then the short-run Phillips Curve will

201.

When the rate of inflation is decreasing, this economic condition is called

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Learning Objective: 38-04 Discuss why there is no long-run trade-off between inflation and

unemployment.

Test Bank: II

Topic: The Long-Run Phillips Curve

202.

Based on the Phillips Curve, when the actual rate of inflation is greater than the

expected rate, the unemployment rate will

203.

Disinflation can be explained by the Phillips Curve analysis as resulting from a

situation where the actual rate of inflation is initially less

than the expected rate, causing the

unemployment rate to

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unemployment.

Test Bank: II

Topic: The Long-Run Phillips Curve

204.

The short-run Phillips Curve intersects the long-run Phillips Curve at the

205.

Assume contracts between workers and employers that call for an increase in the wage

rate of 5 percent are based on an expected

inflation rate of 3 percent. Should inflation

actually be 6 percent, then

206.

The analysis of the short-run and long-run Phillips Curve suggests that an increase in

aggregate demand

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employment.

D.

does not influence real output and employment in the short run or the long run but only the

price level.

207.

Year

Price Index

1

100

2

110

3

120

4

130

Refer to the table. What would be the annual inflation rates in Years 2, 3, and 4,

respectively?

208.

Year

Price Index

1

100

2

110

3

120

4

130

Refer to the table. Calculating the annual inflation rates would indicate that this economy is

experiencing

209.

Which is a basic proposition of supply-side economics?

210.

Supply-side economists contend that the system of taxation in the United States

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Blooms: Understand

Difficu l t y : 02 Medium

Learning Objective: 38-05 Explain the relationship between tax rates, tax revenues, and

aggregate supply.

Test Bank: II

Topic: Taxation and Aggregate Supply

211.

Supply-side policies can be described in terms of the aggregate demand and aggregate

supply model as an attempt to shift

212.

A Congressional representative who calls for a decrease in tax rates in order to

increase saving, work effort, and economic growth

would most likely be advocating

213.

In an aggregate demand-aggregate supply framework, fiscal policy that emphasizes

cutting taxes as a means of improving incentives to

work, save, and invest would be

characterized primarily as a

214.

Which action will tend to decrease aggregate supply, according to supply-side

economists?

215.

Assume that a person saves $50,000 and earns 7 percent annual interest. If the marginal

tax rate is 36 percent, then the after-tax interest

earnings will be

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Learning Objective: 38-05 Explain the relationship between tax rates, tax revenues, and

aggregate supply.

Test Bank: II

Topic: Taxation and Aggregate Supply

216.

Assume that a person earns $600 per day at a certain job. If the marginal tax rate is cut

from 40 percent to 30 percent, then this person’s

after-tax daily earnings will

217.

One central idea in supply-side economics concerning budget deficits is illustrated by

the

218.

According to the Laffer Curve, a cut in the tax rate from above the maximum-revenue

rate to a rate lower than the maximum-revenue rate

will

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C.

decrease tax revenues.

D.

have no effect on tax revenues.

219.

The graph describes the notion that as tax rates rise from zero percent, tax revenues will

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Topic: Taxation and Aggregate Supply

Type: Graph

220.

Refer to the graph. If tax rates are between b and d, then supply-side economists are of the

opinion that a(n)

221.

Refer to the graph. Critics of supply-side economics would argue that tax rates are currently

between

222.

Refer to the graph. A movement from point C to point D on the Laffer Curve represents

223.

Refer to the graph. If the government wants to collect tax revenues equal to R2, then the tax

rate should be set at

224.

Refer to the graph. If the government wishes to collect tax revenues equal to R2, supply-side

economists would strongly advise the

government to set tax rates at

225.

Refer to the Laffer Curve. A cut in the tax rate from T5 to T4 would

226.

Refer to the Laffer Curve. A cut in the tax rate from T2 to T1 would