Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter ST1, Problem 2CQ
To determine
The effects of a shift in the composition of the federal budget on the standards of living.
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During the past five decades, there has been a shift in the composition of the federal budget toward more spending on income transfers and health care and a smaller share for national defense. Does economics indicate that this change will help Americans achieve higher living standards?
Trace the implications of a government budget surplus on the following:
National saving
Interest rates
Private investment
Economic growth
Future living standards
When tracing the effects of the budget surplus, list the assumptions you are making.
Do tax cuts increase economic growth and taxable income so much that tax revenue increases?
Chapter ST1 Solutions
Economics: Private and Public Choice (MindTap Course List)
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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?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_forwardTAXES 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_forward
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