1. Which one of the following does NOT happen when the aggregate supply curve shifts outward?
- A) Potential GDP increases
- B) Real GDP increases
- C) The price level falls
- D) Aggregate demand shifts outward
2. What is the short-run relationship between unemployment and inflation?
- A) There is an inverse relationship (when one increases, the other decreases)
- B) There is a direct relationship (when one increases, the other also increases)
- C) There is no consistent relationship between the two
3. What was the nationality of the economist A. W. Phillips?
- A) American
- B) British
- C) French
- D) New Zealander
- E) Polish
4. At what point does a Phillips Curve intersect the horizontal axis?
- A) At 0% unemployment
- B) At the natural rate of unemployment
- C) At the current rate of unemployment
5. What is the shape of the long-run Phillips Curve?
- A) A vertical line at the level of the natural rate of unemployment
- B) A horizontal line at the current level of inflation
- C) A downward sloping line
- D) An upward sloping line
6. Say that someone with an income of $50,000 pays $4,000 in taxes and would pay $5,000 in taxes if their income rose to $55,000. What is this person`s marginal tax rate?
7. What is the name of the graph that shows the relationship between marginal tax rate and tax receipts?
8. What is the relationship between average tax rate and marginal tax rate in a progressive income tax system?
- A) Average tax rate is higher than marginal tax rate
- B) Marginal tax rate is higher than average tax rate
- C) Average and marginal tax rates are the same
9. What effect does raising marginal tax rates have on the labor supply curve?
- A) Labor supply declines
- B) Labor supply increases
- C) Labor supply is not affected
10. Do you think that the economic growth in the 1980s was the result of the 1981/82 supply-side tax cuts?
- A) Largely yes
- B) Partly yes
- C) No
- D) I do not know