Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
expand_more
expand_more
format_list_bulleted
Question
Chapter 30, Problem 3SPA
(a)
To determine
Explain what happens to supply of labor if government increases the tax rate on labor.
(b)
To determine
Explain what happens to
(c)
To determine
Explain what happens to equilibrium employment if government increases the tax rate on labor.
(d)
To determine
Explain what happens to equilibrium before-tax wage rate if government increases the tax rate on labor.
(e)
To determine
Explain what happens to equilibrium level after-tax wage rate if government increases the tax rate on labor.
(f)
To determine
Explain what happens to potential GDP if government increases the tax rate on labor.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
The government raises the income tax. What is the effect on the supply of labor, the demand for labor, equilibrium employment, the real wage rate, and potential GDP?
The supply of labor _______ and the demand for labor _______.
A.
does not change; decreases
B.
decreases; does not change
C.
decreases; increases
D.
decreases; decreases
Explain the effect to the level of output if taxes (T) will be increased to 120.
3. The government is considering raising the tax
rate on labor income. Explain the supply-side
effects of such an action and use appropriate
graphs to show the directions of change, not exact
magnitudes. What will happen to
a. The supply of labor and why?
b. The demand for labor and why?
c. Equilibrium employment and why?
d. The equilibrium before-tax wage rate and why?
e. The equilibrium after-tax wage rate and why?
f. Potential GDP?
Chapter 30 Solutions
Macroeconomics
Ch. 30.1 - Prob. 1RQCh. 30.1 - Prob. 2RQCh. 30.1 - Prob. 3RQCh. 30.1 - Prob. 4RQCh. 30.1 - Prob. 5RQCh. 30.2 - Prob. 1RQCh. 30.2 - Prob. 2RQCh. 30.2 - Prob. 3RQCh. 30.2 - Prob. 4RQCh. 30.2 - Prob. 5RQ
Ch. 30.3 - Prob. 1RQCh. 30.3 - Prob. 2RQCh. 30.3 - Prob. 3RQCh. 30.3 - Prob. 4RQCh. 30.3 - Prob. 5RQCh. 30.4 - Prob. 1RQCh. 30.4 - Prob. 2RQCh. 30.4 - Prob. 3RQCh. 30.4 - Prob. 4RQCh. 30.4 - Prob. 5RQCh. 30 - Prob. 1SPACh. 30 - Prob. 2SPACh. 30 - Prob. 3SPACh. 30 - Prob. 4SPACh. 30 - Prob. 5SPACh. 30 - Prob. 6SPACh. 30 - Prob. 7SPACh. 30 - Prob. 8SPACh. 30 - Prob. 9SPACh. 30 - Prob. 10SPACh. 30 - Prob. 11SPACh. 30 - Prob. 12APACh. 30 - Prob. 13APACh. 30 - Prob. 14APACh. 30 - Prob. 15APACh. 30 - Prob. 16APACh. 30 - Prob. 17APACh. 30 - Prob. 18APACh. 30 - Prob. 19APACh. 30 - Prob. 20APACh. 30 - Prob. 21APACh. 30 - Prob. 22APACh. 30 - Prob. 23APACh. 30 - Prob. 24APACh. 30 - Prob. 25APACh. 30 - Prob. 26APACh. 30 - Prob. 27APACh. 30 - Prob. 28APA
Knowledge Booster
Similar questions
- Tax Burden Consider a market with a vertical demand curve. If the government imposes taxes on this market, the tax burden: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Will be split evenly between buyers and sellers. b Will be split unevenly between buyers and sellers. Will fall entirely on buyers. d Will fall entirely on sellers.arrow_forwardCan you explain how to figure this out? The demand curve moved to the left Showing what the demand Curve would be after taxesarrow_forwardDescribe the three distinct terms to describe the tax rates?arrow_forward
- Question 1.12: Taxes on labor income The government lowers the tax rate on labor but government spending G does not change; transfers V fall by the amount of the new tax. What are the effects on the supply and demand curves for labor? (The labor supply and demand curves have labor on the horizontal axis and the real wage rate on the vertical axis.) A B C D A. 5.00% B. 5.15% C. 5.30% D. 5.45% E. 5.60% Labor Supply Curve shifts left shifts left shifts right does not change does not change Labor Demand Curve shifts right does not change does not change shifts right shifts left Question 1.13: Growth rate of capital per worker An economy follows a Solow growth model with no technological progress. In 20XX (not the steady state) s = savings rate = 26.08% y = income per worker = 270 units per worker per annum k = capital per worker = 870 units per worker n = population growth rate = 2.26% per annum 8 = annual depreciation rate of capital = 3.20% What is the annual growth rate of capit per…arrow_forwardThe government is considering raising the tax rate on labor income. Explain the supply-side effects of such an action and use appropriate graphs to show the directions of change, not exact magnitudes. What will happen to: The supply of labor and why? The demand for labor and why? Equilibrium employment and why? The equilibrium before-tax wage rate and why? The equilibrium after-tax wage rate and why? Potential GDP? Explain your response with specifics and provide examples.arrow_forwardMatch the term with the definition:[?] is the rate you pay on the last dollars you earned A. Average tax rate[?] is the overall rate you pay on your entire income B. Marginal tax ratearrow_forward
- Question 16 All taxes create some deadweight loss except those on goods O that can be resold for a higher price. O with a very low demand. with a very elastic demand or supply. that everyone likes to consume. with a perfectly inelastic demand or supply.arrow_forwardBy law, the government splits the levy of the FICA tax equally between workers and firms.(a) Using a supply and demand diagram, draw the labor market and label the equilibriumwage and employment level assuming FICA did not exist. Then, on the same graph,draw how the imposition of FICA alters labor market outcomes. Make sure to carefullylabel equilibrium wages, wages paid, wages received, and employment.(b) If the government splits the levy of the FICA tax evenly between workers and firms, thenhow is it that some researchers claim that workers pay approximately 90% of payrolltaxes?(c) Assume that labor unions lobby the government to have the entire levy of FICA shifted tofirms. Will workers ultimately be happy under this new tax structure? Why or why not?arrow_forwardRefer to the interactive below: Tax Burden II. GRAPH O SETTINGS Tax Burden Off Reset ($) Price Tax imposed on: Supply Demand 90 $90.00 Excise Tax (0 - $20) 0.00 80 70 Demand 60 Perfectly Relatively Inelastic Elastic Relatively Elastic 50 $50.00 40 Supply Less Perfectly 30 Elastic Elastic Perfectly Elastic 20 D 10 CALCULATIONS 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 Quantity (thousands per week) Price Paid Quantity No Tax $50.00 4,000 With Tax $50.00 Instructions: Adjust the sliders so that the vertical intercept of the supply curve is $20 and the demand curve is perfectly inelastic. Click the Tax Burden switch above the graph to On. Make additional modifications to the interactive tool as indicated to answer the following questions. a) If there is no tax, the equilibrium price is $50. If a $15 tax paid on sellers is implemented, the buyer will pay $ burden of the tax (Click to select) and the b) Suppose the supply curve gradually changed to become more elastic with the original equilibrium…arrow_forward
- In a market, a given tax amount per unit is imposed on sellers. The government has now decided to change the imposition of tax from sellers to buyers. That is, now the sellers will not pay any tax, but the buyers will have to pay the same amount of tax as did the sellers. Due to the given change, A. The post-tax market price declines B. The post-tax market price increases. C. The post-tax market price stays the same because tax incidence does not depend on whether the tax is imposed on buyers or sellers. D. It cannot be concluded whether the post-tax market price increases or decreases.arrow_forwardThe supply-side effects show that a tax cut on labor income ________ the supply of labor and ________ employment. decreases; increases increases; increases increases; does not change increases; decreases decreases; decreases The supply-side effects of an income tax cut ________ potential GDP and ________ aggregate supply. increase; decrease decrease; decrease decrease; increase increases; do not change increase; increase Which of the following is a monetary policy goal? i. keeping the inflation rate low ii. attaining maximum employment iii. keeping the long-term interest rate at a moderate level ii only i, ii, and iii i only iii only i and iii When real GDP is greater than potential GDP, there is ________ which leads the inflation rate to ________. Group of answer choices an inflationary gap; fall a recessionary gap; rise a recessionary gap; fall a recessionary gap; remain stable an inflationary gap; rise Which…arrow_forwardPlease answer in paragraph. Rate will be given! What can you say about Tax incidence in your country, who carries the burden more? Give examples and explain your answer.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education