"Whether it's a husband and wife at their dinner table, whether it's a small or largebusiness, or a government, economic principles are all the same: you have to spendless than you make" - State Representative Tom Forese (R., Arizona) in 2011. Explainwhat's wrong with this idea from a macroeconomic point of view.HTML EditorB IUA A工E 三三三 xx 三E田回深T 1 12ptParagrap

The consumers spend a fraction of income and save a fraction of income earned by them. If the people…

Answered: "Whether it's a husband and wife at…

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

ChapterST1: Government Spending And Taxation

Section: Chapter Questions

Problem 2CQ

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Economist Arthur Laffer famously pointed out that, in some cases, income tax revenue can actually go up when tax rates go down. Why might this be the case?
Suppose we are in an economy with rich households and poor households. Rich and poor households have different consumption functions, with Cpoor = 100 + 35(Y poor − Tpoor) Crich = 100 + 15(Y rich − Trich) where Y rich, Y poor are the incomes of rich and poor households and T rich, T poor are the taxes faced by rich and poor households. We also have I = 200,G = 100, T = T poor + T rich = 100. Closing out the model, Y = C + I + G = Cpoor + Crich + I + G a Suppose that Y poor = Y rich Y2 (in other words, the total income of poor households is equal to total income of rich households.) Supposing further that T rich = T poor = 50, calculate equilibrium output Y . b Now suppose that Trich = 40,Tpoor = 60. What is equilibrium output now? c How can the government increase output without changing the deficit (hint: think about the difference between output in b and output in c.) d Now assume that T rich = 40, T poor = 60, but instead of output being split equally between rich and poor…
6. Use the following table to answer these questions: Y C I G X $ 500 $ 500 $ 10 $ 20 $ 60 $ 600 $ 590 $ 10 $ 20 $ 40 $ 700 $ 680 $ 10 $ 20 $ 20 $ 800 $ 770 $ 10 $ 20 $ 0 $ 900 $ 860 $ 10 $ 20 - $ 20 $ 1,000 $ 950 $ 10 $ 20 - $ 40 a.What is the Marginal Propensity to Import? b.What is the Marginal Propensity to Invetst? c.What the difference between both of…
The Social Security system levies a tax on workers and pays benefits to the elderly. Suppose that congress increases both the tax and the benefits. For simplicity, assume that the Congress announces that the increases will last for one year only. a. How do you suppose this change would affect the economy? (Hint: Think about the marginal propensities to consume of the young and the old.) b. Does your answer depend on whether generations are altruistically linked?
Briefly explain whether each of the following statements is true or false 5. There is no limit to the real seigniorage revenues governments can obtain by printing money to pay for public expenditure.
And now for some Shakespeare (who says economists aren’t cultured!). In Shakespeare’s play Hamlet, Ophelia says, “If I could lend money at the rates I must pay to borrow, I would. And if I could borrow money at the rates I receive when I lend, I would again. But forsooth, although I spend, I neither borrow nor lend.” Contrary to common belief, Ophelia is entirely rational according to our intertemporal model. Draw a diagram to show how Ophelias remarks can be consistent with rational behavior and smooth convex preferences if she pays a higher interest rate when she borrows than she gets when she lends. Explain what happens in words. (Please draw a clear graph and explain) I will give you a big like if your answer make sense.
According to Financial Times published on November 3, 2021, the UK government's Office of Budget Responsibility calculated that Brexit would cost 4% of GDP per annum over the long term. 4% of the 2021 UK GDP is the equivalent of a £32bn cost per annum to the UK taxpayer. The following case study provides the opportunity to show what you have learned up to this point specific to the EU, Brexit, and the British economy. Instructions Read Chapter 9, Closing Case: The Cost of Brexit (pp. 304-306). Write a minimum of 1-to 2-pages (double-spaced), not recapping the case history or repeating the material in the case. Make sure to address the following in your case study analysis: What have been the benefits of the EU to the British economy? What do you think have been the costs? Why did a majority of people in Britain apparently feel that it was in the best interest of the nation to exit the EU? There is evidence that the uncertainty surrounding the precise nature of the…
If the government gives a $300 tax cut to everyone inthecountry,explainthemechanismbywhichthiswill cause interest rates to rise.
Imagine that the government statisticians who calculate the inflation rate have been updating the basic basket of goods once every 10 years, but now they decide to update it every five years. How will this Change affect the amount of substitution bias and quality/new goods bias?
Course: Macroeconomic - IS-LM Model Prove mathematically the following: Given an increase in the proportional tax on income(t), what happens to the level of output and to the tax?" . Hint: for demostration, use the IS general function for a closed economy Y = C + I + G, where C = a + c*YD and YD = Y + TR - Y*t (where t = proportional income tax) and realize changes i.e., from "t1" to "t2"
6. Use the following table to answer these questions: Y C I G X $ 500 $ 500 $ 10 $ 20 $ 60 $ 600 $ 590 $ 10 $ 20 $ 40 $ 700 $ 680 $ 10 $ 20 $ 20 $ 800 $ 770 $ 10 $ 20 $ 0 $ 900 $ 860 $ 10 $ 20 - $ 20 $ 1,000 $ 950 $ 10 $ 20 - $ 40 What is the Marginal Propensity to Import?
In Germany in 2009 there was considerable debate about the extent to which thegovernment should be intervening in the economy. For example, its citizens were worriedabout the future of Opel, a German car brand that was part of the ailing General Motors.Some wanted the government to make sure jobs were saved no matter what. Others,however, were more hesitant and worried about becoming the government becoming toointerventionist. Traditionally since the Second World War the German government hasseen itself as a referee in market issues and has avoided trying to control parts of theeconomy. It would regulate anti-competitive behaviour, for example, but not try to runmany industries. However in the recession of 2009 when the economy was shrinking thegovernment was forced to spend more to stimulate demand and had to intervene heavilyto save the banking sector from collapse. The government also had to offer aid tobusinesses to keep them alive. 1. What are the possible benefits of a…

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