Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 11, Problem 6E
To determine
When taxes and government spending rises by the same amount, the cause following rise in
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- TAXES Taxes are any governmental action that reduces the real income of wage-earners as well as non-working Americans. The action can also reduce the profit of business. Taxes act as a leakage from the GDP – Income Stream and will reduce both income and GDP over time. Think of taxes…. Did you buy gas on the way to school? Did it include a tax? When you purchase clothing at the mall, how much is the tax? Driver’s License? Fishing License? Hunting License? Tax on Concert Ticket? Tax on Airline Ticket? Are taxes withheld from your paycheck? Income, FICA and state or local taxes Paying bridge tolls? Taxes on personal or real property? Tax on new tires? Alcohol? Cigarettes? Imports with tariffs? Do all these taxes and licenses reduce our disposable income? Why do we sacrifice and pay these taxes? What are the ways that government helps us?arrow_forwardWhy is government spending typically measured as a percentage of GDP rather than in nominal dollars?arrow_forwardWhat are the short-run and long-run implications when it comes to government spending changes versus tax changes?arrow_forward
- What level of spending will be needed to move the economy to full employment?arrow_forwardOver the past century, has the government’s tax revenuegrown more or less slowly than the rest of the economy?arrow_forwardOur economics have redone their calculations. They now estimate that citizensin our country have an MPC of 0.60. We can fix the problem by decreasing GDP by 250. How much should we increase taxes?arrow_forward
- What role taxes policy plays in determining the GDP or national income in an economy? Explain with numerical examples?arrow_forwardThe following graph shows the aggregate demand curve. Shift the aggregate demand curve on the graph to show the impact of a tax cut.arrow_forwardit is easier for governments to change taxes or spending plans?Whatarrow_forward
- How do you recommend the government change GDP and taxes to stabilize the economy in each of the following scenarios? Economic growth has started slowing and the unemployment rate has increased over the past four months. There has been strong growth in GDP over the past year, unemployment is very low, and inflation has started to rise. Prices are stable, unemployment is low and the economy is growing at an average rate.arrow_forwardGovernment is considering a policy change to stimulate the economy by encouraging private consumption by reducing sales taxes. The loss of tax revenue will be made up by increasing taxes on corporate profits and excess savings. What are the short- and long-term effects of such a change?arrow_forwardWhat should government do with its spending and taxes during a recession? Why?arrow_forward
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