Which of the following statements is correct? A decrease in the size of a tax always decreases the tax revenue raised by that tax. A decrease in the size of a tax always decreases the deadweight loss of that tax. Tax revenue decreases when there is a small decrease in the tax rate and the economy is on the downward-sloping part of the Laffer curve. An increase in the size of a tax leads to an increase in the deadweight loss of the tax only if the economy is on the upward-sloping part of the Laffer curve.

Which of the following statements is correct? A decrease in the size of a tax always decreases the tax revenue raised by that tax. A decrease in the size of a tax always decreases the deadweight loss of that tax. Tax revenue decreases when there is a small decrease in the tax rate and the economy is on the downward-sloping part of the Laffer curve. An increase in the size of a tax leads to an increase in the deadweight loss of the tax only if the economy is on the upward-sloping part of the Laffer curve.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter15: Fiscal Policy

Section: Chapter Questions

Problem 1SQ

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Most economists have reached the following conclusion about supply-side economics.a. None of these.b. Supply-side tax cuts are likely to reduce income inequality.c. Supply-side tax cuts are almost certain to lead to smaller budget deficits. d. Supply-side tax cuts are likely to widen income inequality. Give explanation for answer
What is the effect of an increase in taxes when the economy is above full employment? What is the magnitude of the tax multiplier? An increase in taxes when the economy is above full employment _______ aggregate demand and real GDP, and the price level _______. A. increases; falls B. increases; rises C. does not change; does not change D. decreases; falls The magnitude of the tax multiplier is equal to _______. A. MPC times the government expenditure multiplier B. the government expenditure multiplier divided by MPC C. MPC D. the government expenditure multiplier
Changes in taxes The following graph plots an aggregate demand curve. Using the graph, shift the aggregate demand curve to depict the impact that a tax cut has on the economy. Suppose the governments of two very similar economies, economy B and economy A, implement a permanent tax cut of equal size. The marginal propensity to consume (MPC) in economy B is 0.7 and the MPC in economy A is 0.85. The economies are otherwise completely identical. The tax cut will have a larger impact on aggregate demand in the economy with the (SMALLER MPC or LARGER MPC).
What is the Laffer curve. Graphically show how to increase the tax revenue.
- Most economists have reached the following conclusion about supply-side economics. Supply-side tax cuts are likely to reduce income inequality. Supply-side tax cuts are almost certain to lead to smaller budget deficits. Supply-side tax cuts are likely to widen income inequality. None of these.
Which of the following is true about government spending (G) and tax (T) multiplier? The G multiplier is bigger in absolute value than the T multiplier. The T multiplier is bigger in absolute value than the T multiplier. G and T multipliers are always the same size. Whether the G multiplier is larger/smaller than the T multiplier depends on the size of MPC.

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		A decrease in the size of a tax always decreases the tax revenue raised by that tax.
		A decrease in the size of a tax always decreases the deadweight loss of that tax.
		Tax revenue decreases when there is a small decrease in the tax rate and the economy is on the downward-sloping part of the Laffer curve.
		An increase in the size of a tax leads to an increase in the deadweight loss of the tax only if the economy is on the upward-sloping part of the Laffer curve.