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. I is true but not II O II is true but not I OI and II are both true O I and II are both false

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. I is true but not II O II is true but not I OI and II are both true O I and II are both false

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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