Question

1. Which of the following contributed to the severity of the Great Depression of the 1930s?

a. large increases in tax rates in 1932 and again in 1936

b. large increases in the money supply during the early 1930s

c. a reduction in tariffs protecting many U.S. industries

d .a substantial tax rate reduction, which led to large deficits and high interest rates during the early 1930s

2. When a firm or an enterprise obtains more funds from government and less from consumers, the enterprise will

a. be less likely to provide political candidates with campaign contributions than firms that do not benefit from government funding.

b. spend more time trying to influence politicians and less time trying to meet the preferences of consumers.

c. have more incentive to control costs because of the government funding.

d. be driven more by market forces than by politics.

3. Once the criterion for receipt of an income transfer is established,

a. only those people whom the transfer is intended to help will qualify for the transfer.

b. the net gain derived by the transfer recipients will exceed the spending on transfer program.

c. the incentive to modify behavior in order to qualify for the transfer decreases.

d. people will modify their behavior in order to qualify for the transfer, decreasing their net gain from the transfer.

4.  Which person is more likely to have more wealth upon retirement?

a person who has invested 5 percent of their income into an equity mutual fund beginning at age 22

a professional who bought some of their company's stock beginning at age 30

a person who has invested 5 percent of their income into a stock portfolio beginning at age 50

a person who has invested 5 percent of their income into government bonds beginning at age 22

Answer 1

Answer 1. a. large increases in tax rates in 1932 and again in 1936

Reason- Smoot Hawley tariff act of 1930 raised taxes and is conaidered to be one of the major reasons for Great depression.

Answer 2 b. spend more time trying to influence politicians and less time trying to meet the preferences of consumers.

Reason- Enterprise will favor the party which funds it. Since government funds more, enterprise will spend more time influencing the politicians.

Answer 3  d. people will modify their behavior in order to qualify for the transfer, decreasing their net gain from the transfer.

Reason- after the criterion is set people will modify their behavior in order to be elgibl for the funds even though the transfer was not meant for them.

Answer 4. a person who has invested 5 percent of their income into an equity mutual fund beginning at age 22

Reason- A person who has invested in high return asset like mutual fund at younger age 22 will earn more wealth.