Question

1-Why do some home-owners hope for inflation?

2-According to Keynesians, when should the federal government run a deficit and when should it run a surplus?

3-Is the tax imposed on cigarettes progressive, proportional or regressive?

4-How could a greater fiscal deficit create a greater trade deficit?

Answer 1

1) There exist a correlation among the inflation and price of houses. Houses are categorised as an asset good, thus during inflation the prices of house will tend to increase by the inflation rate. Thus when inflation takes hold in an economy the amount of money people put down on a house will also increase. Thus it is vital that buyers to time their moves in an accurate approach while anticipating inflation, as it can impact the mortgage payments value.

2) Keynesian model states that federal government should run a deficit during unemployment period in recessions; and run a surplus during periods of inflation

3) The imposed tax on cigarettes is regressive because it is imposed uniformly, thus taking higher income percentage of from poor people than from rich people