BACC 19
_____ How do payroll taxes potentially affect workers, despite being partly paid by employers?
a) They reduce workers' wages
b) They have no effect on workers
c) They increase workers' benefits
d) They increase workers' take-home pay
____Why might estate and inheritance taxes be considered poor economic policy?
a) They generate too much revenue
b) They are too simple to administer
c) They are too popular among taxpayers
d) They discourage investment and capital accumulation
_____How does the text suggest that capital gains taxes can result in double taxation?
a) By taxing both the buyer and seller of an asset
b) By taxing both property value and property sales
c) By taxing income at both the federal and state level
d) By taxing corporate earnings and then taxing profits from stock sales
_____Based on the information provided, why might states be reconsidering gross receipts taxes despite their known drawbacks?
a) They want to simplify their tax systems
b) They are seeking new revenue streams
c) They are pressured by businesses to do so
d) They are more efficient than other tax types
_____Why might tangible personal property (TPP) taxes be considered more problematic than real property taxes?
a) They are more stable than real property taxes
b) They generate more revenue than real property taxes
c) They are easier to administer than real property taxes
d) They create high compliance costs and distort investment decisions
_____What are the two most widely recognized macroeconomic tools used to manage or stimulate a nation's economy?
a) Monetary policy and fiscal policy
b) Interest rate policy and tax policy
c) Fiscal policy and exchange rate policy
d) Central bank policy and government spending
_____How does an active monetary policy differ from a passive monetary policy?
a) Active policy is predetermined, while passive policy is discretionary
b) Active policy focuses on long-term goals, while passive policy focuses on short-term goals
c) Active policy responds strongly to economic changes, while passive policy responds weakly
d) Active policy is implemented by the government, while passive policy is implemented by the central bank
____According to the Ricardian Equivalence theory, why might a tax cut not lead to increased consumer spending?
a) Tax cuts always lead to increased spending
b) Consumers anticipate future tax increases and save the tax cut
c) Consumers are irrational and don't understand economic policies
d) The government immediately increases other taxes to compensate
_____How might a "gently rising price level" potentially benefit an economy with unemployment?
a) It would make exports more expensive
b) It would discourage consumer spending
c) It would encourage people to save more money
d) It would provide incentives to producers, potentially increasing employment and income
_____What is the main difference between rule-based and discretionary monetary policy?
a) Rule-based policy is always more effective than discretionary policy
b) Rule-based policy focuses on long-term goals, while discretionary policy focuses on short-term goals
c) Rule-based policy is implemented by the government, while discretionary policy is implemented by the central bank
d) Rule-based policy follows pre-specified guidelines, while discretionary policy allows flexibility in response to
circumstances
_____Why might the concept of "neutral money" be difficult to implement in practice?
a) It conflicts with the goal of price stability
b) It requires complex mathematical models
c) It's incompatible with modern banking systems
d) Money inherently has dynamic functions that affect the economy
_____How does the Government Budget Constraint differ in an open economy compared to a closed economy?
a) Closed economies can only use printed money
b) Open economies don't have budget constraints
c) Closed economies have more options for financing budget deficits
d) Open economies can use foreign exchange reserves and foreign borrowing in addition to domestic options
_____What is a potential problem with the Ricardian Equivalence theory?
a) It leads to immediate inflation
b) It only applies to developing economies
c) It requires government intervention in the market
d) It assumes all consumers are perfectly rational and can anticipate future tax changes
_____How might a time-inconsistent policy create challenges for monetary policymakers?
a) It always leads to hyperinflation
b) It prevents the use of discretionary policy
c) It requires constant changes in interest rates
d) It may make the public happy in the short run but fail to achieve long-run policy goals
Why might deflation be considered potentially more harmful to an economy than moderate inflation?
a) Deflation benefits lenders more than borrowers
b) Deflation always leads to higher unemployment rates
c) Deflation always results in increased government spending
d) Deflation can create a cycle of reduced spending and economic contraction
How does the concept of "money supply" relate to inflation according to the Quantity Theory of Money?
a) Money supply has no direct effect on inflation
b) Money supply only affects inflation during economic recessions
c) An increase in money supply leads to a proportional increase in prices
d) An increase in money supply leads to a proportional decrease in prices
Why might young people potentially benefit from inflation more than older individuals?
a) Young people often have debts that become easier to repay with inflation
b) Inflation always benefits the younger generation and the older generation
c) Young people typically have more savings in cash compared to older people
d) Older individuals usually have more investments in stocks than young people
How might structural unemployment differ from cyclical unemployment in terms of potential solutions?
a) Both types of unemployment require the same solutions
b) Structural unemployment requires no intervention, while cyclical does
c) Cyclical unemployment requires education programs, while structural doesn't
d) Structural unemployment may require retraining programs, while cyclical may resolve with economic recovery
In what way does frictional unemployment differ from other types of unemployment in terms of its impact on the economy?
a) Frictional unemployment affects only certain industries
b) Frictional unemployment is always harmful to the economy
c) Frictional unemployment is considered a natural part of a healthy economy
d) Frictional unemployment only occurs during economic recessions and inflation
