Question

In: Economics

1. Which of the following is a sustained rise over time in a nation's production of...

1. Which of the following is a sustained rise over time in a nation's production of goods and services?

a.

Nominal GDP

b.

Real GDP

c.

Economic growth

d.

Inflation

2. Which of the following would be the best fiscal policy to use during a recession?

a.

Increase income tax rates

b.

Raise interest rates

c.

Decrease income tax rates

d.

Cut government spending

3. _____ are people who risk their time, money, and other resources to start and manage a business.

a.

Stakeholders

b.

Venture capitalists

c.

Stockholders

d.

Entrepreneurs

4. How do higher income taxes typically affect the economy?

a.

Higher income taxes result in household and business having less income, which encourages more spending.

b.

Higher income taxes result in household and business having less income, which discourages spending.

c.

Higher income taxes result in household and business having more income, which encourages more spending.

d.

Higher income taxes result in household and business having more income, which discourages more spending.

Solutions

Expert Solution

1.Ans: c) Economic growth

Explanation:

A sustained rise over time in a nation's production of goods and services is called economic growth.

2.Ans: c) Decrease income tax rates

Explanation:

During recession the central government adopts an expansionary fiscal policy. Under this policy , government spending increases whereas tax rate decreases. So that both the consumption and investment expenditue increase in the economy.

3.Ans: d) Entrepreneurs

Explanation:
Entrepreneurs are people who risk their time, money, and other resources to start and manage a business.Explanation:

4.Ans: b) Higher income taxes result in household and business having less income, which discourages spending.

Explanation:

Disposable income = Income - direct tax

Higher disposable income encourages more spending whereas lower disposable income discourages spending.

So higher income taxes result in household and business having less income, which discourages spending.


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