MACROECONOMICS W/SAPLING PLUS
10th Edition
ISBN: 9781319258900
Author: Mankiw
Publisher: MAC HIGHER
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Chapter 19, Problem 3QQ
To determine
The random walk hypothesis.
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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?
In the budget presented by the government, far reaching tax rebates are provided to all classes of tax payers. A researcher therefore conducts a survey to examine whether these tax reductions have led to a change in the consumption patterns of various social classes in the country. What kind of study would this fall under? Explain your answer.
Explain the difference between the policy preferences function and the indirect utility function.
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MACROECONOMICS W/SAPLING PLUS
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- The 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_forwardThe Laffer curve suggests which of the following? a. the optimal tax rate on labor income is 0% b. an increase in tax rates leads to an increase in labor supply. c. there is some maximum amount of tax revenue that the government can collect from taxing income. d. the optimal tax rate leads to the highest amount of tax revenue.arrow_forwardMPC. Explain in short.arrow_forward
- What happens to consumption if the student is constrained for somereason and cannot borrow today?arrow_forwardLimit your answers within 5 pages. Hard-copy, no email attachments. 1 PART - I 1.1 Multiple Choice Questions Q1 The government raises lump-sum taxes on income by $100 billion, and the neoclassical economy adjusts so that output does not change. If the marginal propensity to consume is 0.6, public saving: A) rises by $100 billion. B) rises by 860 billion. C) falls by $60 billion. D) falls by $100 billion. Q2 Based on the table, owners' equity will fall to zero if loan defaults reduce the value of total assets by percent. A) 10 percent. B) 20 percent. C) 30 percent. D) 40 percent. Assets Reserves Loans Securities Bank Balance Sheet $ 10,000 $ 100,000 $ 40,000 1 Liabilities and Net Worth Deposits Debt Equity $ 100,000 $ 20,000 $ 30,000arrow_forwardSuppose the following list of events describes all of the economic activity resulting from an increase in government spending. Suppose that at each step after the initial one, the marginal propensity to consume is 0.62 and the tax rate is 8%. Step 0. The government spends $8500 on meat to host a very large dinner for foreign diplomats. Step A. The butcher takes the income earned by selling the meat, saves some, and spends the rest on a wedding cake for his daughter. Step B. The baker who produced the wedding cake saves some of her earnings and uses the rest to purchase beautiful candlesticks as gifts for all of her friends. Step C. The local candlestick maker saves some of his revenue for retirement and spends the rest on building materials to improve his house. Instructions: Modify the settings in the interactive tool to represent this event. Then click "Spending Rounds" and use the table to answer the following questions. Round answers to the nearest cent, if necessary. How much does…arrow_forward
- Suppose the following list of events describes all of the economic activity resulting from an increase in government spending. Suppose that at each step after the initial one, the marginal propensity to consume is 0.67 and the tax rate is 16%. Step 0. The government spends $8500 on meat to host a very large dinner for foreign diplomats. Step A. The butcher takes the income earned by selling the meat, saves some, and spends the rest on a wedding cake for his daughter. Step B. The baker who produced the wedding cake saves some of her earnings and uses the rest to purchase beautiful candlesticks as gifts for all of her friends. Step C. The local candlestick maker saves some of his revenue for retirement and spends the rest on building materials to improve his house. Instructions: Modify the settings in the interactive tool to represent this event. Then click "Spending Rounds" and use the table to answer the following questions. Round answers to the nearest cent, if necessary. How much…arrow_forwardIf the government wants to increase real GDP levels, it could A) decrease government expenditures and increase taxes. B) increase government expenditures. C) decrease government expenditures. D) increase taxes.arrow_forwardWhich of the following will raise consumer expenditures, C? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a b с d a general increase in housing prices. an increase in interest rates. an increase in expected future income. an increase in the price level.arrow_forward
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