MACROECONOMICS FOR TODAY
10th Edition
ISBN: 9781337613057
Author: Tucker
Publisher: CENGAGE L
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Chapter 11, Problem 15SQ
To determine
The reason for the shift of
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Over the past few months, A Government has made several policy pronouncements aimed at restoring the fiscal health of The economy These policies include:
Reduction of VAT from 12% to 10%;
Increasing the minimum wage from $210 per week to $260
per week; and
Introducing a broad range of price controls.
Using the short-run supply and demand curves, please draw and explain the impact of each of these policy measures on the market.
When combined, will the impact of these policies make the economy better or worse?
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
If the government increases expenditures on goods and services and increases taxation by the same amount, which of the following will occur?
A. Aggregate demand will be unchanged.
B. Aggregate demand will increase.
C. Interest rates will decrease.
D. The money supply will decrease.
Chapter 11 Solutions
MACROECONOMICS FOR TODAY
Ch. 11.3 - Prob. 1YTECh. 11 - Prob. 1SQPCh. 11 - Prob. 2SQPCh. 11 - Prob. 3SQPCh. 11 - Prob. 4SQPCh. 11 - Prob. 5SQPCh. 11 - Prob. 6SQPCh. 11 - Prob. 7SQPCh. 11 - Prob. 8SQPCh. 11 - Prob. 9SQP
Ch. 11 - Prob. 10SQPCh. 11 - Prob. 11SQPCh. 11 - Prob. 1SQCh. 11 - Prob. 2SQCh. 11 - Prob. 3SQCh. 11 - Prob. 4SQCh. 11 - Prob. 5SQCh. 11 - Prob. 6SQCh. 11 - Prob. 7SQCh. 11 - Prob. 8SQCh. 11 - Prob. 9SQCh. 11 - Prob. 10SQCh. 11 - Prob. 11SQCh. 11 - Prob. 12SQCh. 11 - Prob. 13SQCh. 11 - Prob. 14SQCh. 11 - Prob. 15SQCh. 11 - Prob. 16SQCh. 11 - Prob. 17SQCh. 11 - Prob. 18SQCh. 11 - Prob. 19SQCh. 11 - Prob. 20SQ
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- Most economists have reached the following conclusion about supply-side economics. a. Supply-side tax cuts are likely to reduce income inequality. b. Supply-side tax cuts are almost certain to lead to smaller budget deficits. c. Supply-side tax cuts are likely to widen income inequality. d. None of these.arrow_forwardSolve 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?arrow_forwardDuring recessions, taxes tend to a. rise and thereby increase aggregate demand. b. fall and thereby decrease aggregate demand. c. fall and thereby increase aggregate demand. d. rise and thereby decrease aggregate demand.arrow_forward
- 4 Economist B believes that if tax rates are cut, tax revenue is likely to fall. This economist most likely believes that the percentage decrease in tax rates will ______________________________ percentage rise in the tax base.arrow_forwardIdentify the effect of increase in tax rates on either demand or supply curve and the equilibruim interst rates.arrow_forwardIf the government got rid of sales tax, how might this affect the market? shift AD to the right shift SRAS to the right shift AD to the left shift SRAS to the leftarrow_forward
- Average Tax Rate Tax Revenue ($B) 20% $250 40 300 60 250 80 200 Refer to the table. If the current tax rate is 60 percent, supply-side economists would advocate Multiple Choice lowering tax rates to 20 percent, or lower if possible. lowering tax rates to 40 percent. keeping tax rates at 60 percent. raising tax rates to 80 percent.arrow_forwardSupply-side economists: saw influence beyond in both the Bush and Clinton administrations. disagreed with economist Arthur Laffer's views on taxes. were influential in President Reagan's decision to change the tax structure. believe that government regulations do not reduce productivity and undermine industrial efficiency.arrow_forwardThe Laffer curve demonstrates that: policymakers will always reduce tax revenues by raising tax rates. policymakers can always increase tax revenues by raising tax rates. none of the other answers are correct above some point on the tax rate scale, lowering tax rates increases tax revenues. if tax rates are 100%, there will be large tax revenues.arrow_forward
- Suppose the US Federal Government decides to increase its spending without issuing debt by raising additional taxes (i.e., tax-financed government spending). Which of the following statements describes how tax-financed government spending affects the price level over the short run and the long run? The price level remains unchanged over the short run and the long run. The price level increases above it's initial level in short run and further increases over the long run. The price level decreases below it's initial level in the short run and further decreases over the long run. The price level decreases below its initial level in the short-run but increases above its initial level over the long run.arrow_forwardAssume that the goods in the following list are unrelated in consumption: Diamonds, Rice, Smartphones and Sugar. The government wishes to tax the goods in order to raise revenue with the least amount of distortion. How should the government rank the goods in terms of tax rates (with highest tax first)? Explain your reasoning.arrow_forwardConsider the Laffer Curve. Why does government revenue drop to the right of T∗? (A) People work fewer hours, avoid taxes, or leave the country. (B) The government becomes less efficient at tax collection due to government failure. (C) Markets that are charged higher taxes incur more Deadweight Loss. (D) “Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death andarrow_forward
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