Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Question
Chapter 32, Problem 7MCQ
To determine
The effects on the economy, if the government lowers the income tax rate.
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Students have asked these similar questions
The government is considering raising the tax rate on labor income and asks you to
report on the supply-side effects of such an action.
Use appropriate graphs and report directions of change, not exact magnitudes. What
will happen to:
i.
The supply of labor
ii.
The demand for labor and why?
Equilibrium employment and why?
iii.
iv.
V.
vi.
The equilibrium before-tax wage rate and why?
The equilibrium after-tax wage and why?
Potential GDP?
OilPatch is a mineral rich economy in which the
government gets most of its tax revenue from oil
royalties. Table 1 describes the labor market in
OilPatch and Table 2 describes the economy's
production function.
Initially, the government introduces an income tax of $2
per hour worked. Then it doubles its income tax to $4
an hour.
Following the implementation of the $4 an hour
income tax, what is the level of employment, the real
wage rate paid by employers, and the after-tax real
wage rate received by workers? What is
potential GDP?
The level of employment is 2000 hours.
The real wage rate paid by employers is $ 14 an hour
and the after-tax real wage rate received by workers is
$ 10 an hour.
Potential GDP is $ 6 million.
C
Table 1
Real
wage rate
(dollars per hour)
10
11
Table 2
12
13
14
15
Employment
(thousands of hours)
2
134567
Quantity of labor
demanded
supplied
(thousands of hours)
2
6
5
4
3
2
1
Real GDP
(millions of dollars)
6
11
15
18
34567
20
21
Which of the following is true of indirect business taxes?
a) They are included in corporate profits.
b) They are not included in the GDP.
c) They reduce the value of total economic output thereby reducing the value of the GDP.
d) They are collected by business firms that act as agents for the government.
e) They are the same as personal income taxes.
Chapter 32 Solutions
Foundations of Economics (8th Edition)
Ch. 32 - Prob. 1SPPACh. 32 - Prob. 2SPPACh. 32 - Prob. 3SPPACh. 32 - Prob. 4SPPACh. 32 - Prob. 5SPPACh. 32 - Prob. 6SPPACh. 32 - Prob. 7SPPACh. 32 - Prob. 8SPPACh. 32 - Prob. 9SPPACh. 32 - Prob. 10SPPA
Ch. 32 - Prob. 1IAPACh. 32 - Prob. 2IAPACh. 32 - Prob. 3IAPACh. 32 - Prob. 4IAPACh. 32 - Prob. 5IAPACh. 32 - Prob. 6IAPACh. 32 - Prob. 7IAPACh. 32 - Prob. 8IAPACh. 32 - Prob. 9IAPACh. 32 - Prob. 10IAPACh. 32 - Prob. 11IAPACh. 32 - Prob. 1MCQCh. 32 - Prob. 2MCQCh. 32 - Prob. 3MCQCh. 32 - Prob. 4MCQCh. 32 - Prob. 5MCQCh. 32 - Prob. 6MCQCh. 32 - Prob. 7MCQCh. 32 - Prob. 8MCQ
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