Question 1

A reduction in the tax rate on interest income

Accepted Answer

A)  would necessarily raise national saving.
B)  would primarily benefit the wealthy.
C)  both a and b are correct.
D)  None of the above are correct.E) None of the above
F) All of the above

Question 2

Which of the following might explain a decrease in national saving when the tax rate on savings is reduced?

Accepted Answer

A)  its income effect on saving and its effect on the government budget
B)  its income effect on saving but not its effect on the government budget
C)  its effect on the government budget but not its income effect on saving
D)  neither its income effect on saving nor its effect on the government budgetE) All of the above
F) None of the above

Question 3

A decrease in the tax rate is more likely to increase the standard of living if the income effect of a change in the interest rate is

Accepted Answer

A)  small and an increase in private saving tends to have a small impact on the capital stock.
B)  small and an increase in private saving tends to have a large impact on the capital stock.
C)  large and an increase in private saving tends to have a small impact on the capital stock.
D)  large and an increase in private saving tends to have a large impact on the capital stock.E) C) and D)
F) B) and C) B

Question 4

A reduction in the tax rate on income from saving would

Accepted Answer

A)  most directly benefit the poor in the short run.
B)  increase real wages over time.
C)  decrease the capital stock over time.
D)  decrease productivity over time.E) A) and D)
F) None of the above

Question 5

Which of the following raise the incentive for households to save?

Accepted Answer

A)  means-testing of government benefits and inheritance taxes
B)  means-testing of government benefits but not inheritance taxes
C)  inheritance taxes,but not means-testing of government benefits
D)  neither means-testing of government benefits nor inheritance taxesE) All of the above
F) A) and C)

Question 6

Means-tested government benefits base benefits on

Accepted Answer

A)  a household's wealth and are an incentive to save.
B)  a household's wealth and are a disincentive to save.
C)  the current interest rate and are an incentive to save.
D)  the current interest rate and are a disincentive to save.E) None of the above
F) A) and B)

Question 7

Assuming that the substitution effect is large relative to the income effect,tax reform designed to increase saving

Accepted Answer

A)  increases the interest rate and decreases spending on capital goods.
B)  increases the interest rate and increases spending on capital goods.
C)  decreases the interest rate and increases spending on capital goods.
D)  decreases the interest rate and decreases spending on capital goods.E) A) and B)
F) A) and C)

Question 8

Which of the following are both correct?

Accepted Answer

A)  Data show no correlation between saving and measures of economic well-being.A reduction in tax rates may reduce saving because of the income effect.
B)  Data show no correlation between saving and measures of economic well-being.A reduction in tax rates may reduce saving because of the substitution effect.
C)  Data show a positive correlation between saving and measures of economic well-being.A reduction in tax rates may reduce saving because of the income effect.
D)  Data show a positive correlation between saving and measures of economic well-being.A reduction in tax rates may reduce saving because of the substitution effect.E) All of the above
F) B) and C)

Question 9

U.S.public policy discourages saving because

Accepted Answer

A)  other things the same,taxes increase the return from savings.
B)  means tested programs such as Medicaid provide lower benefits to those who did not save.
C)  none of parents' bequest to their children is taxed.
D)  some forms of capital income are taxed twice.E) None of the above
F) All of the above

Question 10

Suppose the tax rate on interest income from saving were reduced.

Accepted Answer

A)  The income effect,but not the substitution effect,would tend to reduce private saving.
B)  The substitution effect,but not the income effect,would tend to reduce private saving.
C)  Both the income and substitution effect would tend to reduce private saving.
D)  Neither the income nor the substitution effect would tend to reduce private saving.E) B) and D)
F) A) and D)

Question 11

Opponents of tax reforms intended to raise saving argue that such reforms

Accepted Answer

A)  favor those with high income,and that saving may not rise because of the substitution effect.
B)  favor those with high income,and that saving may not rise because of the income effect.
C)  favor those with low income,and that saving may not rise because of the substitution effect.
D)  favor those with low income,and that saving may not rise because of the income effect.E) All of the above
F) A) and B)

Question 12

Eliminating means requirements for government benefits would

Accepted Answer

A)  raise saving and primarily benefit people with lower incomes.
B)  raise saving but primarily benefit people with higher incomes.
C)  reduce saving but primarily benefit people with lower incomes.
D)  reduce saving and primarily benefit people with higher income.E) A) and C)
F) B) and C) B

Question 13

A consumption tax that replaces an income tax

Accepted Answer

A)  only taxes a household on the money it spends.
B)  discourages saving.
C)  would likely result in a lower level of saving than an income tax.
D)  ultimately taxes income twice - once when the household pays income tax and once when the household makes a purchase.E) A) and B)
F) All of the above

Question 14

Which of the following are taxed?

Accepted Answer

A)  both corporate profits and dividends paid to stockholders
B)  corporate profits but not dividends paid to stockholders
C)  dividends paid to stockholders but not corporate profits
D)  neither corporate profits nor dividends paid to stock holdersE) A) and D)
F) None of the above

Question 15

A year ago a country reduced the tax rate on all interest income from 20% to 10%.During the year private saving was $500 billion as compared to $400 billion the year before the tax reform.Taxes on interest income fell by $10 billion.Assuming no other changes in income,or government revenues or spending,which of the following is correct?

Accepted Answer

A)  the substitution effect was larger than the income effect;national saving rose
B)  the substitution effect was larger than the income effect;national saving fell
C)  the income effect was larger than the substitution effect;national saving rose
D)  the income effect was larger than the substitution effect;national saving fellE) None of the above
F) All of the above

Question 16

A year ago a country reduced the tax rate on all interest income from 40% to 10%.During the year private saving was $600 billion as compared to $500 billion the year before the tax reform.Taxes collected on interest income fell by $150 billion.Assuming no other changes in government revenues or spending which of the following is correct?

Accepted Answer

A)  the substitution effect was larger than the income effect;national saving rose
B)  the substitution effect was larger than the income effect;national saving fell
C)  the income effect was larger than the substitution effect;national saving rose
D)  the income effect was larger than the substitution effect;national saving fellE) B) and C)
F) A) and C)

Question 17

Suppose tax laws were reformed to encourage saving by increasing the rate of return on savings.Which of the following would be true?

Accepted Answer

A)  Both the income effect and the substitution effect would tend to increase the amount of money a household saved.
B)  The income effect would tend to increase household savings while the substitution effect would tend to decrease household savings.
C)  The income effect would tend to decrease household savings while the substitution effect would tend to increase household savings.
D)  Both the income effect and the substitution effect would tend to decrease the amount of money a household saved.E) A) and D)
F) All of the above C

Question 18

Which of the following is correct?

Accepted Answer

A)  No forms of capital income are taxed twice.
B)  The tax code cannot be rewritten to provide greater incentive to save.
C)  Means-tested benefits increase the incentive to save.
D)  There is a correlation between national savings rates and measures of economic well-being.E) None of the above
F) B) and C)

Question 19

Which of the following two effects of a decrease in the tax rate on saving would raise savings?

Accepted Answer

A)  the income effect and the substitution effect
B)  the income effect but not the substitution effect
C)  the substitution effect but not the income effect
D)  neither the substitution effect nor the income effectE) B) and C)
F) C) and D)

Question 20

Which of the following reduce the incentive for households to save?

Accepted Answer

A)  both means-testing of government benefits and inheritance taxes
B)  means-testing of government benefits but not inheritance taxes
C)  inheritance taxes,but not means-testing of government benefits
D)  neither means-testing of government benefits nor inheritance taxesE) A) and D)
F) C) and D)

Exam 23: Six Debates Over Macroeconomic Policy: Should the Tax Laws Be Reformed to Encourage Saving

A reduction in the tax rate on interest income

Correct Answer
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Which of the following might explain a decrease in national saving when the tax rate on savings is reduced?

Correct Answer
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A decrease in the tax rate is more likely to increase the standard of living if the income effect of a change in the interest rate is

Correct Answer
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B

A reduction in the tax rate on income from saving would

Correct Answer
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Which of the following raise the incentive for households to save?

Correct Answer
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Means-tested government benefits base benefits on

Correct Answer
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Assuming that the substitution effect is large relative to the income effect,tax reform designed to increase saving

Correct Answer
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Which of the following are both correct?

Correct Answer
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U.S.public policy discourages saving because

Correct Answer
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Suppose the tax rate on interest income from saving were reduced.

Correct Answer
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Opponents of tax reforms intended to raise saving argue that such reforms

Correct Answer
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Eliminating means requirements for government benefits would

Correct Answer
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B

A consumption tax that replaces an income tax

Correct Answer
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Which of the following are taxed?

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Suppose tax laws were reformed to encourage saving by increasing the rate of return on savings.Which of the following would be true?

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C

Which of the following is correct?

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Which of the following two effects of a decrease in the tax rate on saving would raise savings?

Correct Answer
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Which of the following reduce the incentive for households to save?

Correct Answer
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Exam 23: Six Debates Over Macroeconomic Policy: Should the Tax Laws Be Reformed to Encourage Saving

A reduction in the tax rate on interest income

Correct AnswerverifiedShow Answer

Which of the following might explain a decrease in national saving when the tax rate on savings is reduced?

Correct AnswerverifiedShow Answer

A decrease in the tax rate is more likely to increase the standard of living if the income effect of a change in the interest rate is

Correct AnswerverifiedB

A reduction in the tax rate on income from saving would

Correct AnswerverifiedShow Answer

Which of the following raise the incentive for households to save?

Correct AnswerverifiedShow Answer

Means-tested government benefits base benefits on

Correct AnswerverifiedShow Answer

Assuming that the substitution effect is large relative to the income effect,tax reform designed to increase saving

Correct AnswerverifiedShow Answer

Which of the following are both correct?

Correct AnswerverifiedShow Answer

U.S.public policy discourages saving because

Correct AnswerverifiedShow Answer

Suppose the tax rate on interest income from saving were reduced.

Correct AnswerverifiedShow Answer

Opponents of tax reforms intended to raise saving argue that such reforms

Correct AnswerverifiedShow Answer

Eliminating means requirements for government benefits would

Correct AnswerverifiedB

A consumption tax that replaces an income tax

Correct AnswerverifiedShow Answer

Which of the following are taxed?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose tax laws were reformed to encourage saving by increasing the rate of return on savings.Which of the following would be true?

Correct AnswerverifiedC

Which of the following is correct?

Correct AnswerverifiedShow Answer

Which of the following two effects of a decrease in the tax rate on saving would raise savings?

Correct AnswerverifiedShow Answer

Which of the following reduce the incentive for households to save?

Correct AnswerverifiedShow Answer

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B

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B

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C

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