Consider an economy in which government raises revenue with an income tax. In class we look at two options: a lump sum tax equal to a fixed amount (that we called TA) or imposing a tax rate t proportional to income. I. the proportional tax will exacerbate the effect of a shock to consumer confidence on output. II. the proportional tax will result in a smaller level of aggregate output. O I and II are both true I is true but not II O I and II are both false Il is true but not I

Consider an economy in which government raises revenue with an income tax. In class we look at two options: a lump sum tax equal to a fixed amount (that we called TA) or imposing a tax rate t proportional to income. I. the proportional tax will exacerbate the effect of a shock to consumer confidence on output. II. the proportional tax will result in a smaller level of aggregate output. O I and II are both true I is true but not II O I and II are both false Il is true but not I

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter24: Fiscal Policy

Section: Chapter Questions

Problem 5P

See similar textbooks

Similar questions

Using the graph, shit the aggregate demand curve to depict the impact that a tax hike has on the economy. PRICE LEVEL 120 110 C 100 R 30 OUTPUT Aggregate Demand 50 10 Aggregate Demand Suppose the governments of two very similar economies, economy N and economy M, implement a permanent tax out of equal size. The marginal propensity to consume (MPC) in economy N is 0.85 and the MPC in economy M is 0.8. The economies are otherwise completely identical The tax cut will have a larger impact on aggregate demand in the economy with the
What's the tax multiplier if MPC = 0.75? Select one: a. -4 b. -3 С. 3 d. 0.33
The only fill in the blank options are Larger MPC or Smaller MPC
QUESTION 7 Consider an economy in which government raises revenue with an income tax. In class we look at two options: a lump sum tax equal to a fixed amount (that we called TA) or imposing a tax rate proportional to income. 1. the proportional tax will exacerbate the effect of a shock to consumer confidence on output. II. the proportional tax will result in a smaller level of aggregate output. O I is true but not Il O II is true but not I O I and II are both true O I and II are both false
Now we look at the role taxes play in determining equilibrium income. Suppose we have an economy of the type in Sections 10-4 and 10-5, described by the following functions: C=50+.8YD I=70 G= 200 TR=100 t=20 a. Calculate the equilibrium level of income and the multiplier in this model. b. Calculate also the budget surplus, BS. c. Suppose that t increases to .25. What is the new equilibrium income? The new multiplier? d. Calculate the change in the budget surplus. Would you expect the change in the surplus to be more or less if C = .9 rather than .8? e. Can you explain why the multiplier is 1 when t=1?
A recent study from the National Bureau of Economic Research examined what people did with the $1,200 per-person stimulus payments distributed the US in April 2020. On average people said they spent about 40 percent of the total dollar amount they received, with the remaining 60 percent of the money split roughly equally between saving and paying down debt. Suppose that stimulus payments totaled $US 100 billion. a. If the tax rate is equal to 0.30 and the marginal propensity to import 0.10, what is the short run effect of the stimulus program on GDP? b. How might the long-run effect of the stimulus policy differ from the short-run effect? c. Inflation in the US in 2020 was about 0.62 %. Some people fear that inflation will increase in 2021 and ahead. Give one argument that supports this fear. and one argument against.
Suppose the tax multiplier in an economy is -8. If the government wants to lower total spending (TS) by $8000 what should they do to Taxes (T)? Group of answer choices a. they should increase taxes by $64000 b. they should decrease taxes by $64000 c. they should increase taxes by $1000 d. they should decrease taxes by $1000
Please help me answer this question. Thanks in advance
please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly
Assume that the consumption function is given by C = 150 + 0.85(Y – T)and the tax function is given by T = t0 + t1Y where C = Consumption, Y = Total output/income, t0 = Autonomous/fixed tax and t1 = Tax rate. If t0increases by 1 unit, then explain whether consumption will be increased or decreased, and how much?
1. Provide a written conclusion on Fiscal Policy?
Imagine that a group of advisors to the president has suggested providing a tax cut for the middle class in order to stimulate the economy and reduce unemployment. The president has asked for your analysis of this proposed tax cut. Post your thoughts both as an economic scientist and economic policy advisor. Read the scenario and, respond to the following: Describe how an economic scientist would approach the tax cut recommended by the advisors in the scenario you just read. What are some economic factors that the economic scientist would consider when crafting his or her statement on the tax cut proposed? Describe how an economic policy advisor would approach the same tax cut and provide the reasoning behind the position. Remember to think like an economist scientist and economic policy advisor when you write your post, even if it goes against your own opinions about whether a tax cut is a good idea. To guide your responses, consider the following questions: What economic…