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Question 31

1. Regulations that make it costly to dismiss workers

   	a.	protect the interests of workers without any secondary effects.
   	b.	reduce the overall level of unemployment.
   	c.	reduce total employment because they also make it more costly to hire workers.
   	d.	expand total employment because they make it more attractive to hire additional workers.

2.5 points

Question 32

1. Per capita incomes are higher in countries with

   	a.	higher marginal tax rates.
   	b.	higher tariffs.
   	c.	greater self-sufficiency in the production of goods consumed domestically.
   	d.	more economic freedom.

2.5 points

Question 33

1. Which of the following is most likely to enhance economic growth?

   	a.	well-defined and secure private property rights
   	b.	high taxes to fund government projects
   	c.	an active government anti-trust policy
   	d.	markets that are dominated by a single firm

2.5 points

Question 34

1. In recent years, the average per capita income of the most economically free quartile of countries in the Economic Freedom of the World index was

   	a.	almost identical with that of the countries in the bottom quartile.
   	b.	nearly 50 percent higher than the countries in the bottom quartile.
   	c.	approximately twice that of the countries in the bottom quartile.
   	d.	approximately 8 times that of the countries in the bottom quartile.

2.5 points

Question 35

1. The argument that import restrictions save jobs and promote prosperity fails to recognize that

   	a.	there are no secondary effects of import restrictions.
   	b.	import restrictions will lower prices in the protected industries.
   	c.	import restrictions cannot create jobs in any industry.
   	d.	U.S. imports provide people in other countries with the purchasing power required for the purchase of U.S. exports.

2.5 points

Question 36

1. Which of the following resulted from the Smoot-Hawley trade bill of 1930?

   	a.	The stock market began a steady recovery from the crash of October 1929.
   	b.	The higher tariff rates increased federal revenues and led to a balanced budget the year after passage of the bill.
   	c.	Imports decreased, while exports increased, resulting in an overall increase in GDP and tariff revenues.
   	d.	The unemployment rate, which stood at 7.8% when the bill was passed, soon soared to double-digit levels.

2.5 points

Question 37

1. According to the principle of comparative advantage, worldwide output and consumption will be higher when nations specialize in the production of those goods and services

   	a.	they can provide at a lower opportunity costs.
   	b.	that employ the most domestic workers.
   	c.	that will increase their foreign exchange rate by the largest amount.
   	d.	for which their consumption taxes are lowest.

2.5 points

Question 38

1. A decrease in marginal tax rates will

   	a.	reduce the share of additional earnings that individuals are permitted to keep.
   	b.	reduce the incentive of individuals to earn additional income.
   	c.	allow taxpayers to keep more of what they earn.
   	d.	make tax-deductible goods less expensive for the consumer to purchase.

2.5 points

Question 39

1. The experience of the 1930s indicates that substantial tax increases during a severe recession will result in

   	a.	an increase in the incentive to earn.
   	b.	an increase in tax revenues that will lead to a balanced budget.
   	c.	smaller budget deficits, which will speed an economic recovery.
   	d.	a reduction in output and employment.

2.5 points

Question 40

1. What will be the effect of an increase in the payroll tax rate?

   	a.	Businesses will have lower profits, but output and employment will be unaffected.
   	b.	The cost of hiring workers will increase, resulting in a decline in employment.
   	c.	The cost of hiring workers will decline and employment will increase.
   	d.	Tax revenues will increase, but there will be no adverse impact on employment.

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