Which of the following refers to taxes that do not necessarily take a larger absolute share of an increase in income?
Answer(s): C
Regressive taxes are those for which the average tax rate falls as income rises. They take a smaller percentage of income as income rises, so they will not necessarily take a larger absolute amount of income as income rises.
The trough of a business cycle is generally characterized by:
Answer(s): D
There are four phases of a business cycle: trough, recovery, peak, and recession. The trough is marked by low levels of economic activity and underuse of resources. Investors are unwilling to risk new investments in productive capacity.
During the recessionary phase of a business cycle,
There are four phases of a business cycle: trough, recovery, peak, and recession. During the recessionary phase of a business cycle, economic activities and employment levels contract and society's resources are underused_ Because of the underuse of resources, potential national income will exceed actual national income.
Which of the following may provide a leading indicator of a future increase in gross domestic product?
An economic indicator is highly correlated with changes in aggregate economic activity. A leading indicator changes prior to a change in the direction of the business cycle. The leading indicators included in the Conference Board's index are average weekly hours worked by manufacturing workers, unemployment claims, consumer goods orders, stock prices, orders for fixed assets, building permits, timeliness of deliveries, money supply, consumer confidence, and the spread between the yield on 10-year Treasury bonds and the federal funds rate. An increase in weekly hours worked by production workers is favorable for economic growth.
Some economic indicators lead the economy into a recovery or recession, and some lag it.An example of a lag variable is:
Answer(s): A
Economists use a variety of economic indicators to forecast turns in the business cycle. Economic indicators are variables that in the past have had a high correlation with aggregate economic activity. The best known are the composite indexes calculated by The Conference Board, a private research group with more than 2,700 corporate and other members worldwide. Indicators may lead, lag, or coincide with economic activity. The Conference Board's lagging indicators include average duration of unemployment in weeks, the change in the index of labor cost per unit of output, the average prime rate charged by banks, the ratio of manufacturing and trade inventories to sales, the commercial and industrial loans outstanding, the ratio 'of consumer installment credit outstanding to personal income, and the change in the CPI for services.
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