Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Chapter 17, Problem 2DQ
To determine
Comment the given situation regarding tax cuts.
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Economist Arthur lagger 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?
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A constitutional amendment has been proposed that would require Congress to balance the budget each year. Is it possible to balance the budget every year? Is it desirable?
Chapter 17 Solutions
Economics: Principles & Policy
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- is it always possible to increase tax revenues by increasing tax rates?arrow_forwardDoes tax cuts reduce tax revenue?arrow_forwardRefer to the News Wire to answer three questions. NEWS WIRE: FISCAL STIMULUS: TAX CUTS Trump Tax Cuts Boost Spending The Tax Cuts and Jobs Act of 2017 seems to be working. Although the lion's share of President Trump's tax cuts went to business, consumers got a tax break as well. For the average U.S. household, the tax cut amounts to roughly $40 a week in take-home pay. That may not sound like much, but with 130 million households, that extra income can pack some punch. According to the National Retail Federation, consumer spending was up 4.8 percent in the first six months of this year. And the government reports that GDP grew by 4.2 percent in the second quarter, the best performance since 2014. There may be other factors at work here, but tax-cut fueled consumer spending is certainly a big contributor. Source: News accounts of September–October 2018. Instructions: In part a, enter your response as a whole number. In parts b and c, round your responses to one decimal…arrow_forward
- How do taxation and government spending impact the economy of a country positively in three ways and negatively in three ways?arrow_forwardWhat does fiscal policy include? Which of the following regulation prevent price gouging?arrow_forwardDuring the past five decades, there has been a shift in the composition of the federal budget toward more spending on income transfers and health care and a smaller share for national defense. Does economics indicate that this change will help Americans achieve higher living standards?arrow_forward
- What are Expansionary and discretionary fiscal policies? Examples to dumb down.arrow_forwardRecently, a politician was interviewed about fiscal policy where she mentioned reducing the "tax gap." a. Indicate whether the following statements are "True" or "False" regarding the tax gap. • The tax gap is the difference between how much tax is collected and how much Congress requires to be collected. . The tax gap is the difference between actual Federal income tax collections and the amount the IRS projects should be collected if there is full compliance with all income tax laws. b. There are pertinent political and economic issues relative to the tax gap. Complete the items below concerning the tax gap: By most estimates, the net annual tax gap is What means could be employed to reduce the gap? Hire more ● • $405 billion. personnel. • Excessive activity could result in the public's reaction • Shouldn't the government attempt to close the tax gap and thereby eliminate most of the.arrow_forwardWhat are some of the arguments for and against a requirement that the federal government budget be balanced every year?arrow_forward
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