Question

16) Which of the following is FALSE about a Laffer curve?
A) It illustrates the relationship between tax revenue and income tax rates
B) Its bell-shape is due to income effect and substitution effect
C) It is upward sloping if substitution effect is greater than income effect
D) It is upward sloping if income effect is greater substitution effect
E) None of above
17) Which of the following is FALSE about the assumptions of a production function in our
models?
A) Constant returns to scale
B) Marginal product of labour is decreasing
C) As K increases, marginal product of labour decreases
D) Y is increasing in both K and N
E) None of above
18) In a two-period model, a consumer's budget constraint in the future period is
A) c' = y'- t' + (1 + r)s.
B) c' + (1 + r)s = y'- t'.
C) c + s = y - t.
D) c' = y' - t' - (1 + r)s.
E) y' - t' = (1 + r)s.
19) If we represent a two-period consumer's lifetime wealth as we, and r denotes the real rate of
interest, the vertical (future consumption) intercept of the consumer's budget line is equal to
A) we.
B) we(1 + r).
C) we/(1+r)
D) 1+r/we
E) -(1 + r)c + we(1 + r).

Answer 1

16) which of the following is false about laffer une solution option c) It is upward sloping if substitution - effect is greater than in come effect. 0 tux revenue IE: Income effect SE; substitution - effect IES SE - SEDIE t .... n 17.) which of the following is false about the . production function in our models polation option () As K increases, margind prodent I labor decreases we knows h o ] margind product of lubor ĭ nereases with increase in ko we

3 18) O yun In a two period model, a consumer's budget constant in the future period ir: 1: correct option. Al c'=y't+(1+2) future consumption = Interest on saving of first period . . tsawing + future disposable income c = rst sty'ť (c = "'-t! +(17075] t ?! r=red rate; weza period lifetime wealth. et c'= we ci future consumption In verticel interceft c present consumiphon c=0 ». C'z we - 197 nu