The federal government decides to impose a hefty tax on the sale of cars.a) What is the effect on the number of cars sold?The number of cars sold would (Click to select)b) As the result of the tax, the government collects more revenue. Whathappens to the budget deficit?The budget deficit would (Click to select)c) What is the effect of the tax in interest rates?The tax would cause interest rates to (Click to select)1 of 19NextPrey10:17 PM10/5/2019ర

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MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 17SQ

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A controversial issue in managing climate change is the effect of taxes on gasoline. Higher taxes would reduce the after-tax price received by gasoline producers. The price elasticity of the supply of gasoline has been estimated to be 2.0.a. Explain why the price elasticity of supply is positive.b. Suppose that a tax on gasoline reduces the after-tax price of gasoline by 5%. By how much would suppliers reduce gasoline production?c. Compare the effect of the tax on gasoline in the short vis-à-vis long run.
You are an economist in the Internal Revenue System and just heard of a plan to increase the sales tax on a certain widget by $.06. Last year customers purchased about 10 million widgets. The demand curve in the last year was such that a $.01 increasein price decreases sales by 100,000. A study showed that a $.01 increase in price resulted in producers willing to provide 50,000 more widgets to the market. Congress stated that this$.06 tax will increase government revenues by $600,000 and raise the price of each widget by $.06. Is this correct? If so, explain why this is the case and, if not, what is the increase in prices and revenues?
What has been the impact of the Supreme Court ruling in Citizens United v. Federal Election Commission Group of answer choices Corporations and political action committees were forbidden from donating to elections. Election spending was ruled unconstitutional. Election spending has increased because it allowed unlimited contributions from companies and political action committees. Election spending has decreased as stricter spending limits were put in place.
Solve for the maximum amount of revenue the government can raise from this tax. Hint: the tax rate will be a fraction between 0 and 1. In general, what explains the shape of the Laffer curve?
Taxes & Subsidies Suppose that, in order to incentivize drivers to switch to electric vehicles, a government imposes a tax to be added to the purchase price of gasoline cars and a subsidy (discount voucher) on the purchase of electric cars. You can assume whatever you think is reasonable about the demand and supply elasticities to prices. Illustrate the likely effects of those policies using graphs. Discuss: What happens to the quantity of gasoline and electric cars in equilibrium? Who bears the burden of the tax, and who enjoys the subsidy in your model (between producers and consumers)? As a policymaker, do you want demand and supply curves to be more or less price elastic for the policy to work?
In a country : The Federal Government allocates 25% of its Federal Budget towards enhancing the Factors of Production – this includes capital, labor, and technological advancements. The Federal Budget for the fiscal year is $4 trillion. The Federal Reserve System decides to increase the monetary base by 10% to stimulate the economy. A federal tax of 20% is imposed on corporate profits. A particular company, Y Corp, uses the Fee-for-Service model and made a profit of $10 million this fiscal year. Questions: a) How much has the Federal Government allocated to enhance the Factors of Production? b) After the Federal Reserve System's intervention, if the original monetary base was $M trillion, what is the value of $M? c) How much federal tax does Y Corp have to pay?
(Figure: Supply Tax) In the accompanying pizza market, with a $2 tax imposed on the sellers, how much of the tax is paid by the buyers and how much of the tax burden is borne by the sellers? Sellers pay all of the $2 tax. Buyers pay all of the $2 tax. Sellers pay $1.50 and buyers pay $0.50 of the tax. Buyers pay $1.50 and sellers pay $0.50 of the tax.
whenever the government wants to increase revenues it usually trend to increase taxes on goods that have inelastic demand than elastic demand.Why, explain using examples
RM3. Quantity demanded is Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a the willingness to pay for the marginal unit. b the amount that an individual demands at a particular price level. c always combined with price levels. d all of the above are correct Which of the following would be most likely to increase consumption spending? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a A reduction in consumer credit card debt b A drop in stock prices c A higher interest rate d The expectation of lower future prices
Generally speaking, how do taxes affect markets? What affect does legal incidence have on economic incidence? What effect does elasticity have on the economic incidence of taxes?
Suppose the California legislature passed a sweeping law to lower the number of regulations for building homes such as decreasing the parking requirements and setback requirements. Suppose there is a housing tax. What is the effect of this law on the PES for housing? What effect would this law have on the tax burden for buyers?
President Biden has proposed a $2.2 trillion Infrastructure package to repair roads and bridges. The exact source of the funds is unclear at the time of construction of this exam, but some policy analysts think that at least one part of the funding will be an increase in the federal excise tax on gasoline. Suppose the size of this increase in excise tax is written as t. Using a graph and equilibrium, analyze and explain the impact of this t dollars per gallon increase in excise tax on gasoline. Which of the curve(s), if any, would shift, and why? Graphically, show the new equilibrium price and quantity (labeling it P1 and Q1). At the new equilibrium, please determine how much of the tax increase was borne by gasoline consumers and how much was absorbed by gasoline sellers? Indicate the incidence of taxation for both consumers and sellers on the graph and explain. What will determine whether consumers or sellers will bear a higher relative burden of taxation? Please explain in detail.

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