ECON102 Q2

Which of the following is CORRECT regarding tax revenues?

• they increase during recessions
• they decrease during economic slowdowns
• they do not change with changes in the tax rate
• they are the only revenue source in the government's budget

Assuming there is no foreign trade in the economy, equilibrium is achieved when ________ equal [saving + net taxes - investment].

• investment expenditures
• consumption expenditures
• net exports
• government purchases

Disposable income is income plus net taxes.

• True
• False

If the government wants to increase employment, government purchases should be ________ and/or taxes should be ________.

• increased; decreased
• increased; increased
• decreased; increased
• decreased; decreased

Taxes are increased by $50 billion and income decreases by $300 billion. The value of the tax multiplier is

• -3.
• -5.
• -6.
• -15.

If the government increases taxes by $20 billion and decreases spending by $20 billion, equilibrium output increases by $20 billion.

• True
• False

Transfer payments are the ________ in the government's budget.

• largest expenditure source
• smallest expenditure source
• smallest revenue source
• argest revenue source

When a government runs a surplus

• it must raise taxes.
• its debt increases.
• its debt decreases.
• it must cut spending.

The government budget is balanced when tax receipts equal transfer payments.

• True
• False

During an economic expansion, income ________, unemployment benefits ________ and the budget deficit ________.

• rises; fall; rises
• rises; rise; falls
• rises; fall; falls
• falls; rise; rises