Question

6- Suppose you paid a tax of $10 on an income of $100, $25 on an income of $200 and $60 on an income of $300. This is an example of a: (a) flat tax; (b) regressive tax; (c) inverse tax; (d) progressive tax.

7- Even under the best of times, the unemployment rate never drops to zero because: (a) such a drop would cause deflation; (b) there will always be children and retirees unwilling to work; (c) structural unemployment can never be zero; (d) workers at the unemployment offices would get very upset.

8- Impacts of taxes can be felt in: (a) changes in the propensity to take on risk; (b) alterations of the work-leisure tradeoff; (c) adjustments in the capital-to-labor ratio and investment; (d) all of the above.

10- In order to grow over the long term, societies need to: (a) move directly from agricultural to information-based economies; (b) enact protectionist legislations; (c) delay some current consumption in order to save and invest in capital equipment; (d) increase the size of the natural resources sector.

please answer all

Answer 1

Answer 6. d. progressive tax

reason- Progressive tax means tax rate increases as taxable income increases. when income =$100, tax rate =25%

when income= $300, tax rate= 50%

Answer 7. (c) structural unemployment can never be zero

reason- Even when unemployment rate is zero there will still be structural and frictional unemployment rate.

Answer 8. all of the above

reason- Changes in taxes affect marginal propensity to consume, work leisure and capital lsbor ratio etc.

Answer 10. (c) delay some current consumption in order to save and invest in capital equipment;

reason- Delay in consumption leads to rise in savings and investment which leads to growth.