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- Consider the model studied in class. Which of the following statements is true about increases in government spending? Government spending can only increase welfare in the Social Planner's equilibrium never in the competitive market. Government spending always decreases welfare even if it increases productivity If the effects on productivity are bigger than the effects of taxes, welfare could increase. If the effects on productivity are smaller than the effects of taxes, welfare could increase.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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- The 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_forwardThe Laffer curve suggests which of the following? a. the optimal tax rate on labor income is 0% b. an increase in tax rates leads to an increase in labor supply. c. there is some maximum amount of tax revenue that the government can collect from taxing income. d. the optimal tax rate leads to the highest amount of tax revenue.arrow_forwardDescribe the following term in your own words. Balanced budgetarrow_forward
- Refusing to pay taxes because you disapprove of how the money is being used by the government is an example of whatarrow_forwardA government is evaluating the effectiveness of a new tax policy. Economists collect data on tax rates, government revenue, and economic growth before and after the policy implementation. They use econometric methods to assess the policy's impact on economic indicators. This application of econometrics primarily serves to:A) Estimate policy impactB) Create new tax lawsC) Design government websitesD) Recruit government staff Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism.Answer completely and accurate answer.Rest assured, you will receive an upvote if the answer is accuratearrow_forwardThe Federal Debt Reduction Commission recommended that both mortgage-related subsidies and tax breaks from the federal agencies that help middle- and lower-income families buy homes be scaled back or eliminated. The Obama administration has proposed taking the latter step, eliminating Fannie Mae and Freddie Mac but doing nothing about the incentives and tax breaks that benefit wealthier taxpayers. Is their proposal ethical? Why or why not?arrow_forward
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