Macroeconomics Study Guide

Topics: Inflation, Economics, Macroeconomics Pages: 2 (550 words) Published: December 3, 2013
1. Inflation is most likely to result from a(n): Under normal circumstances, a short-run trade-off exists between the rate of inflation and the rate of employment. Aggregate supply shocks can cause both higher rates of inflation and higher rates of unemployment. 2. Assume contracts between workers and employers that call for an increase in the wage rate of 5% are based on an expected inflation rate of 3%. Should inflation actually be 6% then: Yes 3. From the perspective of supply-side economists, a cut in tax rates will be: Lead to long term economic growth. 4. Which is a basic proposition of supply-side economics? Tax increases on business reduce productivity and output and increase the price level.. 5. In the long run, demand-pull inflation: The initial increase in aggregate demand moves the economy along its vertical aggregate supply curve. 6. The notion that large reductions in personal income tax rates will increase incentives to work, save, and invest is most closely associated with: Supply-side economics 7. The idea that reductions in tax rates will increase tax revenue is illustrated by the: Supply-side economist 8. Which event probably contributed to the stagflation of the 1970’s? A rise in the price of oil. 9. Economist Arthur Laffer argued that Robin Hood and his men would: “end up with less revenue than if they collected a relatively small “tax” from each traveler for passage through the forest.” 10. In the long run, stability for the economy is achieved only at: 11. Which is a key provision of supply-side economics is: Lower marginal tax rates encourage saving and investing. 12. One of the central ideas in supply-side economics is: Lower marginal tax rates encourage saving and investing. 13. The Laffer Curve is a central concept in: Supply-side economics 14. Which is a reason given by supply-side economists as to why tax cuts should increase aggregate supply? It keeps unemployment rates and inflation low. 15. Supply-side economists contend that...
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