PRACTICE TEST #3 ECON 21051. The largest portion of the federal budget is dedicated toa. discretionary spending. .b. mandatory outlays.c. interest payments.d. tax collection.e. defense spending2. A progressive income tax system is one in whicha. income tax rates decrease as earned income increases.b. everyone pays the same tax rate, so that wealthier people pay a larger sum of taxes.c. everyone pays the same tax rate, so that people with low incomes pay a smaller sum of taxes.d. income tax rates increase as earned income increases.e. income taxes are based on occupation.Refer to the following table to answer the next three questions:2012 Federal Income Tax BracketsTaxable Income Tax Rate$0–$8,700 10 percent$8,701–$35,350 15 percent$35,351–$85,650 25 percent$85,651–$178,650 28 percent$178,651–$388,350 33 percentOver $388,350 35 percent3. Using the table, what is the total federal income tax bill for someone who makes $67,000 per year?a. $16,750b. $12,780c. $11,169d. $10,050e. $6,7004. Using the table, what is the average tax rate for someone who makes $67,000 per year?a. 10.0 percentb. 14.2 percentc. 16.7 percentd. 25.0 percente. 19.1 percent5. Using the table, what is the marginal income tax rate for someone who makes $67,000 per year?a. 10.0 percent d. 25.0 percentb. 14.2 percent e. 19.1 percentc. 16.7 percent6. The wealthiest 20 percent of households in the United Statesa. do not contribute their fair share of federal income taxes.b. contribute the vast majority of all federal income taxes.c. are forced to pay too much in federal income taxes.d. pay zero federal income taxes because of tax loopholes.e. contribute less than 50 percent of all federal income taxes because of tax loopholes.7. Taxes that are deducted from workers’ paychecks are referred to asa. paystub revenue.b. income seizures.c. excise taxes.d. payroll taxes.e. payday taxes.8. Fiscal policy includesa. only increases and decreases to taxes.b. only increases and decreases to government spending.c. increases and decreases to both taxes and government spending.d. only decreases in taxes and increases in government spending.e. only increases in taxes and decreases in government spending.9. The goal of expansionary fiscal policy is to shift the ________ curve to the ________.a. aggregate demand; leftb. aggregate demand; rightc. short-run aggregate supply; rightd. short-run aggregate supply; lefte. long-run aggregate supply; left10. The Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009 are both examples of ________ policy.a. contractionary fiscalb. expansionary monetaryc. contractionary monetaryd. expansionary fiscale. countercyclical monetary11. A government might want to reduce aggregate demand if it believes that the economy isa. in long-run equilibrium.b. above the natural rate of unemployment.c. producing below full-employment output.d. expanding past its long-run capabilities.e. in a recession.12. If your marginal propensity to consume is 0.75 and you get an additional $400 in income, you would spend ________ on consumption.a. $400.00 b. $200.00c. $533.33d. $300.00e. $1,600.0013. If the marginal propensity to consume is equal to 0.75, the spending multiplier is equal toa. 4.0.b. 1.75.c. 0.25.d. 0.57.e. 1.33.14. Government programs that automatically implement countercyclical fiscal policy in response to economic conditions are called automatica. stabilizers.b. policies.c. balancers.d. equalizers.e. holders.15. Supply-side fiscal policy explains how taxes and government spending can affecta. aggregate demand.b. short-run aggregate supply.c. long-run aggregate supply.d. the demand for loanable fundse. the supply for loanable funds.16. Policies that focus on educationa. will affect aggregate supply immediately.b. are examples of an automatic stabilizer.c. are not examples of a supply-side fiscal policy initiative.d. will shift the long-run aggregate supply curve to the left over time.e. increase effective labor resources and thus increase aggregate supply over time.17. An illustration of the relationship between tax rates and tax revenues is called thea. Laffer curve.b. new classical critique.c. aggregate demand–aggregate supply model.d. loanable funds market.e. marginal tax curve.18. A major advantage of money over barter is that it isa. a medium of exchange.b. fiat money.c. a unit of account.d. a store of value.e. currency.19. Which of the following events could cause inflation in the United States—a country that uses fiat money?a. There is a discovery of a new silver mine.b. There has been a decision made to switch from a currency based on the amount of gold (a scarce metal) to acurrency based on the amount of silver (a plentiful metal).c. Individuals are frustrated by the infrequent occurrence of the double coincidence of wants.d. The government decides to print more money.e. The government decides to transition to a commodity-backed money.20. The value of money ________ when the price level increases.a. increasesb. decreasesc. initially increases but then decreasesd. initially decreases but then increasese. does not changeRefer to the following table to answer the next two questions:Checkable deposits $12,500,000Currency $34,000,000Traveler’s checks $1,000,000Money market mutual funds $10,000,000Small time deposits $7,000,000Savings deposits $500,00021. What is the value of M1?a. $13,500,000b. $46,500,000c. $47,500,000d. $57,500,000e. $64,500,00022. What is the value of M2?a. $13,500,000b. $46,500,000c. $47,500,000d. $57,500,000e. $65,000,00023. The Coppock Bank began the day with $10,000,000 in its reserve account and ended the day with the same amount. If loans, other assets, and Treasury securities were $3,000,000 and owner’s equity was $2,000,000, what is the bank’s total amount of assets?a. $7,000,000b. $11,000,000c. $13,000,000d. $15,000,000e. There is not enough information to solve this.24. Suppose that the Bank of Bananas has excess reserves of $10,000,000 and checkable deposits of $200,000,000. If the bank has a reserve requirement of 25 percent, what is its total amount of required reserves?a. $10,000,000 d. $60,000,000b. $40,000,000 e. $202,500,000c. $50,000,00025. Expansionary monetary policy occurs whena. a central bank acts to decrease the money supply in an effort to stimulate the economy.b. Congress and the president increase taxes in an effort to stimulate the economy.c. Congress and the president decrease taxes in an effort