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ECO 372 Week 3 Apply: Public Finance and Aggregate Demand and Supply Homework
Review the Week 3 Public Finance and Aggregate Demand and Supply Quiz in preparation for this assignment.
Complete the Week 3 Public Finance and Aggregate Demand and Supply Assignment in McGraw-Hill Connect®. These are randomized questions.
Note: You have only one attempt available to complete assignments. Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date.
Which of the following descriptions is most representative of the mix of revenues and expenditures of a local government?
Revenue is predominantly from income taxes and payroll taxes. Expenditures include income security and interest on debt.
Revenue is predominantly from sales taxes and may include personal or corporate income taxes. Expenditures include investments in education and infrastructure.
Revenue is predominantly from property taxes but may include sales taxes or income taxes. Expenditures include investments in education and public welfare.
Revenue is predominantly from excise taxes and property taxes. Expenditures include investments in infrastructure and national defense.
Which of the following transactions best represents the government playing the role of provider of a good or service?
The local government purchases office furniture for renovations to its Department of Parks and Recreation.
The federal government provides Social Security checks to those citizens who qualify for the payment.
The state government imposes a tax on cigarette purchases to discourage smoking.
The state government pays for police to patrol the state and federal roadways.
The Social Security tax is regressive because
Multiple Choice
no Social Security tax is collected for incomes in excess of a “cap” income level.
the Social Security tax rate applied does not rise with the salary level.
each individual must pay a set percentage of his or her income in Social Security taxes.
as income increases, the Social Security tax rate increases at a decreasing rate.
Which of the following is the largest expenditure item of state governments?
Multiple Choice
Health and hospitals
Highways
Public welfare
Education
A federal budget deficit exists when federal government
Multiple Choice
spending exceeds tax revenues in a given year.
spending is increasing in a given year.
taxation is decreasing in a given year.
assets are less than liabilities in a given year.
Most economists believe that property taxes
Multiple Choice
should become an important source of revenue for the federal government.
are regressive.
should be eliminated.
are progressive.
Many states in the U.S. acquire significant amounts of funds from the following, except
Multiple Choice
personal income taxes.
property taxes.
grants from the Federal government.
state-run lotteries.
Social Security contributions are part of
Multiple Choice
payroll taxes.
excise taxes.
indirect taxes.
reverse taxes.
A budget surplus means that
Multiple Choice
a nation’s exports are greater than its imports.
government revenues are greater than expenditures in a given year.
government expenditures are greater than revenues in a given year.
a nation’s imports are greater than its exports.
The two largest sources of tax revenue for the U.S. federal government are
Multiple Choice
excise taxes and customs duties.
payroll taxes and excise taxes.
personal income taxes and payroll taxes.
personal income taxes and corporate income taxes.
A public debt that is owed to foreigners can be burdensome because
Multiple Choice
the payment of interest will conflict with a nation’s foreign aid programs.
foreign interest rates are persistently higher than domestic interest rates.
the payment of interest reduces the volume of goods and services available for domestic uses.
the payment of interest will necessarily have a deflationary effect on prices in the paying nation.
One important reason why the United States government is not likely to go bankrupt even with a large public debt is that it has
Multiple Choice
the ability to decrease interest rates and increase investment spending.
the capacity to pay off its outstanding debt with gold.
the power to print money to finance the debt.
a strong military to protect it from creditors.
Which of the following is not a government activity that is involved in public finance?
Multiple Choice
Providing public goods and services such as national defense and education.
Redistributing income through various taxes and income-transfer payments.
Regulating the activities of firms in the financial sector of the economy.
Running government-owned enterprises such as hospitals, utilities, and lotteries.
Which of the following statements about payroll taxes is false?
Multiple Choice
They are lump-sum taxes not based on wages/salaries.
They provide funds for Social Security.
They include Medicare taxes.
Both employers and employees pay these taxes.
Which is the most important source of tax revenue for local governments?
Multiple Choice
Corporate income taxes
Personal income taxes
Sales and excise taxes
Property taxes
Aggregate demand is best described as the relationship between the:
quantity demanded in a market and the market price.
quantity of real GDP demanded in the economy and the price level.
quantity demanded and the price.
quantity demanded of a good or service and the price of the good or service.
Use the graph of Remi’s economy to complete the following statements.
- Point B is referred to as
- The movement from point A to point E is called a
- Point D is referred to as
- The movement from point B to point D is called
The long-run aggregate supply curve is vertical because:
firms cannot change prices or input prices in the long run.
some input prices are sticky in the long run.
all input prices are flexible in the long run.
all input prices are sticky in the long run.
Complete the following statements:
- In the short run, when the price level increases, the quantity of real GDP supplied will increase and
the aggregate supply curve will not shift .
- In the short run, some input prices are said to be sticky. This means that:
some input prices will remain constant even as the price level changes.
all prices will remain constant in the economy.
some firms will not be able to change the prices they charge.
For each of the examples below, determine the effect on aggregate demand.
- In order to reduce the deficit, the government decides to increase the level of taxes in the economy. This causes:
a decrease in aggregate demand, shifting the aggregate demand curve to the left.
a movement along the aggregate demand curve to the right, indicating an increase in the quantity of real GDP demanded.
an increase in aggregate demand, shifting the aggregate demand curve to the right.
a movement along the aggregate demand curve to the left, indicating a decrease in the quantity of real GDP demanded.
- The economy experiences a sustained expansion in stock prices for the majority of companies in the country. This causes:
an increase in aggregate demand, shifting the aggregate demand curve to the right.
a decrease in aggregate demand, shifting the aggregate demand curve to the left.
a movement along the aggregate demand curve to the left, indicating a decrease in the quantity of real GDP demanded.
a movement along the aggregate demand curve to the right, indicating an increase in the quantity of real GDP demanded.
An increase in productivity will _____.
Multiple Choice
decrease aggregate supply and aggregate demand
increase aggregate supply and aggregate demand
increase aggregate supply
increase aggregate demand
The intersection of the aggregate demand and aggregate supply curves determines the _____.
Multiple Choice
equilibrium level of real domestic output and prices
per-unit cost of production in the economy
shape of the aggregate demand curve
productivity level in the economy
When the price level decreases, _____.
Multiple Choice
there is a decrease in consumer spending that is sensitive to changes in interest rates
the demand for money falls and the interest rate falls
holders of financial assets with fixed money values decrease their spending
holders of financial assets with fixed money values have less purchasing power
In the aggregate demand-aggregate supply model, the economy’s price level is assumed to be _____.
Multiple Choice
constant, just like in the aggregate expenditures model
variable, unlike in the aggregate expenditures model
variable, just like in the aggregate expenditures model
constant, unlike in the aggregate expenditures model
Use the following graph to answer the next question.
If aggregate supply shifts from AS1 to AS2, then the price level will _____.
Multiple Choice
decrease and real domestic output will decrease
increase and real domestic output will increase
decrease and real domestic output will increase
increase and real domestic output will decrease
A decrease in expected returns on investment will most likely shift the AD curve to the _____.
Multiple Choice
right because Ig will increase
left because Ig will decrease
left because C will decrease
right because C will increase
The long-run aggregate supply curve is _____.
Multiple Choice
horizontal
upward-sloping and becomes flatter at output levels above the full-employment output
upward-sloping and becomes steeper at output levels above the full-employment output
vertical
An increase in aggregate demand is most likely to be caused by a(n) _____.
Multiple Choice
decrease in expected returns on investment
decrease in government spending
increase in real interest rates
decrease in the tax rates on household income
Use the following graph, which shows an aggregate demand curve, to answer the next question.
If the price level increases from 150 to 250, the real output demanded will _____.
Multiple Choice
increase by $800 billion
decrease by $600 billion
increase by $200 billion
decrease by $200 billion
The aggregate supply curve (short run) _____.
Multiple Choice
slopes upward and to the right
graphs as a vertical line
slopes downward and to the right
graphs as a horizontal line