Macroeconomics
Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Chapter 1, Problem 4AP

(a)

To determine

To ascertain: The category to which the statementbelongs, out of positive and normative types: A tax cut will raise interest rates.

(b)

To determine

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 determine

To ascertain:The category to which the statement belongs, out of positive and normative types: Payroll taxes are too high.

(d)

To determine

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 determine

To ascertain:The category to which the statement belongs, out of positive and normative types: Payroll taxes should not be cut unless capital gains taxes arc also cut.

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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!
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.
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