Question

Which of the following statements about taxation is incorrect? A change in taxes does not affect...

Which of the following statements about taxation is incorrect?

A change in taxes does not affect consumption.

An increase in taxes decreases income and expenditures.

A tax cut raises income and expenditures.

Cutting taxes by $20 is not the same as increasing government spending by $20.

A tax cut affects aggregate demand indirectly.

The sum of the unemployment rate and the inflation rate is known as:

the mortality rate.

the misery index.

a coincident indicator.

the macroeconomic index.

the market index.

The U.S. government deficit as a percentage of GDP was much larger during World War II than it was in the 1980s and 1990s.

True

False

Which of the following does not qualify as an automatic stabilizer in the economy?

Food stamps

Unemployment compensation

Progressive income taxes

Welfare payments

Lump-sum taxes

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Answer #1

1. Ans - A change in taxes does not affect consumption.

Explanation:

Change in taxation changes the income so also affect consumption.

2. Ans - The misery index

3. Ans - True

4. Ans - Lump-sum taxes

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