Sub part (a):
To determine: The flow of income.
Sub part (a):

Explanation of Solution
The construction of school forces the government to boost is expenses in the market by increasing business revenues. Resource owners of the school construction have a raise in income. These resources need to be side tracked from private sector. Taxes might have to increase to construct the high school.
In case, the economy is facing an
Concept Introduction
Circular flow: It is a way of representing the flow of money between the two main groups in society - producers (firms) and consumers (households). This flow is a part of the fundamental process for satisfying human wants.
Sub part (b):
To determine: The flow of income and impact of tax.
Sub part (b):

Explanation of Solution
It reduces the financial resources transfer from the businesses to the government. Then the business tax reduces and thus, the business owners will get a bigger percent of the income. These companies use the amplified profits to acquire capital commodities and labor. The weakening of the commercial income tax forces the government to reduce spending, and corporate spending increases the causing resource reallocation.
In case, the economy is facing unemployment and no reduction in government expenses, we see an increased spending if the companies increase their expenses on capital commodities. The distribution effect will have a dependency in knowing if the profits are going straight to people with a higher income or are these being spent for the assets and employees of the organization.
Sub part (c)
The impact over the resource reallocation of the economy.
Sub part (c)

Explanation of Solution
This will cause an increase in commodities and services to people from the government or this can be termed as net taxes that are being reduced, which is the same to a raise in transfer payments. This is the income’s redistribution in support of the people who are not wealthy. Resources to be paid by the government will be going up as additional teachers need to be employed and salaried.
This will need the resource reallocation from the private sector to the public sector by reducing the unemployment rate. In this case, there will be an upward pressure on prices to an extent if this is a transfer payment program and the production will not increase.
Sub part (d):
The impact over the resource reallocation of the economy.
Sub part (d):

Explanation of Solution
This will cause an increase in net taxes paid by business. As the business will see this as an increase in costs, it will bring down its
The households will reduce their demand for utilization of commodities and services from companies as they have a low income. So the net household taxes that the government receives will decrease. The distribution of income will be away from profits toward the other three categories to the extent that the total tax revenues increase.
There will be a slight increase in the allocation of resources from the private sector to the public sector. Resources will also be allocated towards pollution control equipment. As the supply has reduced due to the increase in costs to business, unemployment and thus, the prices will increase.
Want to see more full solutions like this?
- 1. Imagine a society that produces military goods and consumer goods, which we'll call "guns" and "butter." a. Draw a production possibilities frontier for guns and butter. Using the concept of opportunity cost, explain why it most likely has a bowed-out shape. b. Show a point that is impossible for the economy to achieve. Show a point that is feasible but inefficient. c. Imagine that the society has two political parties, called the Hawks (who want a strong military) and the Doves (who want a smaller military). Show a point on your production possibilities frontier that the Hawks might choose and a point the Doves might choose. d. Imagine that an aggressive neighboring country reduces the size of its military. As a result, both the Hawks and the Doves reduce their desired production of guns by the same amount. Which party would get the bigger "peace dividend," measured by the increase in butter production? Explain.arrow_forwardA health study tracked a group of persons for five years. At the beginning of the study, 20%were classified as heavy smokers, 30% as light smokers, and 50% as nonsmokers. Resultsof the study showed that light smokers were twice as likely as nonsmokers to die duringthe five-year study, but only half as likely as heavy smokers.A randomly selected participant from the study died during the five-year period. Calculatethe probability that the participant was a heavy smokerarrow_forwardConsider two assets with the following returns: State Prob. of state R₁ R2 1 23 13 25% 5% 2 -10% 1% Compute the optimal portfolio for an investor having a Bernoulli utility of net returns u(r) = 2√√r+ 10. Compute the certainty equivalent of the optimal portfolio. Do the results change if short-selling is not allowed? If so, how?arrow_forward
- In the graph at the right, the average variable cost is curve ☐. The average total cost is curve marginal cost is curve The C Cost per Unit ($) Per Unit Costs A 0 Output Quantity Barrow_forwardWhat are some of the question s that I can ask my economic teacher?arrow_forwardAnswer question 2 only.arrow_forward
- 1. A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate fund, and the third is a (riskless) T-bill money market fund that yields a rate of 8%. The probability distributions of the risky funds have the following characteristics: Standard Deviation (%) Expected return (%) Stock fund (Rs) 20 30 Bond fund (RB) 12 15 The correlation between the fund returns is .10.arrow_forwardFrederick Jones operates a sole proprietorship business in Trinidad and Tobago. His gross annual revenue in 2023 was $2,000,000. He wants to register for VAT, but he is unsure of what VAT entails, the requirements for registration and what he needs to do to ensure that he is fully compliant with VAT regulations. Make reference to the Vat Act of Trinidad and Tobago and explain to Mr. Jones what VAT entails, the requirements for registration and the requirements to be fully compliant with VAT regulations.arrow_forwardCan you show me the answers for parts a and b? Thanks.arrow_forward
- What are the answers for parts a and b? Thanksarrow_forwardWhat are the answers for a,b,c,d? Are they supposed to be numerical answers or in terms of a variable?arrow_forwardSue is a sole proprietor of her own sewing business. Revenues are $150,000 per year and raw material (cloth, thread) costs are $130,000 per year. Sue pays herself a salary of $60,000 per year but gave up a job with a salary of $80,000 to run the business. ○ A. Her accounting profits are $0. Her economic profits are - $60,000. ○ B. Her accounting profits are $0. Her economic profits are - $40,000. ○ C. Her accounting profits are - $40,000. Her economic profits are - $60,000. ○ D. Her accounting profits are - $60,000. Her economic profits are -$40,000.arrow_forward
- Principles of MicroeconomicsEconomicsISBN:9781305156050Author:N. Gregory MankiwPublisher:Cengage LearningPrinciples of Economics 2eEconomicsISBN:9781947172364Author:Steven A. Greenlaw; David ShapiroPublisher:OpenStax
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningPrinciples of Microeconomics (MindTap Course List)EconomicsISBN:9781305971493Author:N. Gregory MankiwPublisher:Cengage LearningPrinciples of Economics, 7th Edition (MindTap Cou...EconomicsISBN:9781285165875Author:N. Gregory MankiwPublisher:Cengage Learning




