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Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509
BuyFind

Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509

Solutions

Chapter
Section
Chapter 23, Problem 6CQQ
Textbook Problem
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Advocates of taxing consumption rather than income argue that

a. a consumption tax is a better automatic stabilizer.

b. taxing consumption does not cause any dead-weight losses.

c. the rich consume a higher fraction of income than the poor.

d. the current tax code discourages people from saving.

Expert Solution
To determine
The argument in agreement to taxing consumption.

Explanation of Solution

Option (d):

Tax code discourages saving by taxing the return to saving , by double taxation of capital income, taxing bequests, having means tests for welfare and Medicaid and by granting financial aid as a function of wealth. Thus, option‘d’ is correct.

Option (a):

Automatic stabilizers offset fluctuations in economic activity without direct intervention by policymakers and the consumption tax does not fall in this category...

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Chapter 23 Solutions

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