Concept explainers
(a)
To ascertain: The category to which the statementbelongs, out of positive and normative types: A tax cut will raise interest rates.
(b)
To ascertain:The category to which the statement belongs, out of positive and normative types: A reduction in the payroll tax would primarily benefit poor and middle-class workers.
(c)
To ascertain:The category to which the statement belongs, out of positive and normative types: Payroll taxes are too high.
(d)
To ascertain:The category to which the statement belongs, out of positive and normative types: A cut in the payroll tax would improve the presidents popularity ratings.
(e)
To ascertain:The category to which the statement belongs, out of positive and normative types: Payroll taxes should not be cut unless
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Check out a sample textbook solution- There is equilibrium in the relevant market. The economic effects of taxes can be analysed using method of supply and demand. (Start with equilibrium in the relevant market. Identify who must pay the tax. Find the new equilibrium. Determine the economic incidence of the tax.). Use graphs!arrow_forwardSelect the correct one : Q-1) President Biden wants to increase the estate tax (the tax on wealth when a person dies) from 23.8% to 43.4%. a) The increase would lead to greater tax revenue and will help poor people gain access to more social welfare benefits with no unintended consequences. b) The increase would lead to no change in revenue over time but less income inequality stemming from a fairer tax code. c) The higher tax would reduce the problem of scarcity for all working poor people. d) The increase would be an economically inferior solution to reducing income inequality. In fact, lower taxes – even on the rich - tends to help the poor more. e) B and D only.arrow_forwardDuring an economic _______, there is a decline in economic activity, including falling GDP, rising unemployment, and reduced consumer spending. To combat this, governments often implement _______ fiscal policies to stimulate the economy. A) expansion, contractionaryB) downturn, expansionaryC) boom, contractionaryD) recession, expansionary.arrow_forward
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- Fiscal stance refers toarrow_forwardThe government often helps those affected by a natural disaster by subsidizing reconstruction. Households who qualify for the program pay a price P-S per “unit of reconstruction” (where P is the regular price). An economist who advises the government argues that this program should be reformed. Specifically, the economist argues that the government should provide free reconstruction up to a certain amount. Any amount in excess is charged at the regular price, P. The economist argues that if the government spends the same amount of money in this alternative program, then the following would be the case: The households would be better off. Less reconstruction will be undertaken (which may be desirable if the people live in a natural disaster-prone area). Demonstrate by means of a graph that the economist is right, assuming that preferences over “reconstruction” and “all other goods” are convex and monotonic. (Big Hint: First graph the budget line without any program putting…arrow_forwardDescribe the following term in your own words. Balanced budgetarrow_forward
- According to the U.S. Office of Management and Budget, the 2011 budget for defense exceeded the budget for education by $658.6 billion. If x represents the budget for education, in billions of dollars, the budget for defense can be represented byarrow_forwardThe state has decided to increase funding for public education. They are considering four alternative taxes to finance these expenditures. All four taxes would raise the same amount of revenue.1.sales tax on food.2.tax on families with school-age children.3.property tax on vacation homes.4.sales tax on jewelry.(1) Taxes change incentives. How might individuals change their behavior becauseof each of these taxes?arrow_forwardRefusing to pay taxes because you disapprove of how the money is being used by the government is an example of whatarrow_forward
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