Question

9. Which of the following statements is (are) correct?
(x) A budget surplus occurs when government receipts are more than spending and a budget deficit occurs when government spending is more than receipts.
(y) The most common methods that the U.S. government uses to finance the budget deficit is by borrowing solely from the Federal Reserve or printing currency in the amount of the budget deficit.
(z) If interest rates remain constant, then government must spend a larger amount of its revenue on interest payments as government debt increases.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only

10. The federal budget deficit in 2009 was nearly eight times larger than the deficit in 2007. The primary reason for the dramatic increase in the deficit was
A. the shift in political power from Republicans to Democrats.
B. severe budget tightening by members of Congress.
C. the recession experienced during this time.
D. All of the above are correct.
E. A and B, only

11. Allison paid a tax of $0.24 on the first dollar that she earned and she paid a tax of $0.24 on the last dollar she earned in 2018. According to the textbook, Allison's marginal tax rate in 2018
A was equal to her average tax rate.
B. was lower than her average tax rate.
C. was either equal to or lower than her average tax rate.
D. was more than 24 percent.
E. was exactly 24 percent.

Answer 1

9. Ans: B (X) and (Y) only.

Explanation: If interest rates rise continuously, then government must spend a larger amount of its revenue on interest payments as government debt increases.

10. Ans: C. the recession experience during this time.

Explanation: With recession, tax revenues fall and government spends a lot to come out of it.

11. Ans: E. was exactly 24 percent.

Explanation: Average tax will be lower than marginal tax because marginal tax is constant and there is some income range where no tax is paid.

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