Homework Answers
Point B is the point where tax revenue is maximum.
If it is at point B then government should keep current tax rates.
If it is at point C then it should decrease tax rate in order to reach point B.
It it is at point D government should increase tax rate in order to reach point B where tax revenue is maximum.
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8. The Laffer curve Suppose that the following curve shows tax revenues at various tax rates...
8. In the figure below a hypothetical Laffer curve is drawn. Answer the follow- ing questions...
8. In the figure below a hypothetical Laffer curve is drawn. Answer the follow- ing questions about the curve. 1,000 600 0 80 50 30 Tax Rate (percent) a. What is the Laffer curve argument about the association between tax rates and tax revenues? b. At what tax rate do revenues reach a maximum? c. Why are there two tax rates (30 percent, 80 percent) that yield the same revenue? d. What causes tax revenues to decline beyond point Y?...
The laffer curve shows that: a higher tax rate always produces higher tax revenue.I a lower...
The laffer curve shows that: a higher tax rate always produces higher tax revenue.I a lower tax rate always produces higher tax revenue. a high and low tax rate can produce the same tax revenues. there is no relation between tax rate and revenue.
3. This question concerns government and the Laffer Curve. a. Draw the Laffer Curve (with the...
3. This question concerns government and the Laffer Curve. a. Draw the Laffer Curve (with the correct axes) and explain what it means to “be on the wrong side of the Laffer Curve.” (2 points) b. When the following statement is made: “we want to broaden the base and lower the rates,” explain the impact of this on the taxes paid of high income people. (2 points) c. In order for tax cuts to increase revenue, explain what has to...
The Laffer Curve graphs the amount of government revenue as a function of the tax rate....
The Laffer Curve graphs the amount of government revenue as a function of the tax rate. It is hypothesized to be inverse U-shaped -- first increasing, reaching a maximum, and then decreasing. The maximum of the Laffer curve represents the largest size of government that can be sustained, because beyond it, higher tax rates actually reduce government revenue. Consider a consumer with preferences U = ln(x) + ln(1 − ℓ), where x is consumption and ℓ is labor supply. Let...
marginal tax rates and _ are commonly used to increase aggregate supply. A) Lowering; increasing government...
marginal tax rates and _ are commonly used to increase aggregate supply. A) Lowering; increasing government transfer payments B) Lowering; offering investment tax credits C) Raising; increasing government transfer payments D) Raising; reducing government spending 10. When a firm can its capital equipment over a shorter period, it cuts its taxes A) B) C) D) appreciate; later appreciate; now depreciate; now depreciate; later 11. Figure: Laffer Curve 2 100 Average Tax Rate (%) 0 10 20 30 40 50 60...
The following table shows the real output demanded and supplied at various price levels in a...
The following table shows the real output demanded and supplied at various price levels in a hypothetical economy. Real Output Demanded Price Level Real Output Supplied (Billions of dollars) (Index number) (Billions of dollars) 40 160 340 80 120 320 120 80 280 200 40 200 320 20 80 On the following graph, use the blue points (circle symbol) to plot the aggregate demand (Initial AD) curve for the economy. Then use the orange points (square symbol) to plot the...
5. Automatic adjustments to the government budget The following table provides some information on government expenditures (G) and tax revenues (T) at different levels of real GDP in a hypothetic...
5. Automatic adjustments to the government budget The following table provides some information on government expenditures (G) and tax revenues (T) at different levels of real GDP in a hypothetical economy. Throughout this problem you should assume that government transfers (TR) are zero. Real GDP (Billions of dollars) 460 Government Expenditures (G) (Billions of dollars) 72 72 72 Tax Revenues (T) (Billions of dollars) 70 72 74 540 Use the blue line (circle symbols) to plot the government expenditures schedule...
The following table shows the quantity of money supplied and the quantity of money demanded for various interest rates 4...
The following table shows the quantity of money supplied and the
quantity of money demanded for various interest rates
4. Study Questions and Problems #4 The following table shows the quantity of money supplied and the quantity of money demanded for various interest rates. Interest Rate (Percent) Demand for Money (Billions of dollars) Supply of Money (Billions of dollars) 500 100 300 500 500 700 900 500 500 500 The following graph depicts the money supply curve in orange. On...
4. The Laffer curve Government-imposed taxes cause reductions in the activity that is being taxed, which...
4. The Laffer curve Government-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections. To understand the effect of such a tax, consider the monthly market for cigarettes, which is shown on the following graph. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph...
4. The Laffer curve Governments often place so-called sin taxes on goods or services such as...
4. The Laffer curve Governments often place so-called sin taxes on goods or services such as cigarettes, alcohol, and pornography. These kinds of taxes are popular with politicians because they are usually more palatable to voters than income taxes. To understand the effect of such a tax, consider the monthly market for adult DVDS, which is shown on the following graph Use the graph input tool to help you answer the following questions. You will not be graded on any...
8. In the figure below a hypothetical Laffer curve is drawn. Answer the follow- ing questions about the curve. 1,000 600 0 80 50 30 Tax Rate (percent) a. What is the Laffer curve argument about the association between tax rates and tax revenues? b. At what tax rate do revenues reach a maximum? c. Why are there two tax rates (30 percent, 80 percent) that yield the same revenue? d. What causes tax revenues to decline beyond point Y?...
The laffer curve shows that: a higher tax rate always produces higher tax revenue.I a lower tax rate always produces higher tax revenue. a high and low tax rate can produce the same tax revenues. there is no relation between tax rate and revenue.
marginal tax rates and _ are commonly used to increase aggregate supply. A) Lowering; increasing government transfer payments B) Lowering; offering investment tax credits C) Raising; increasing government transfer payments D) Raising; reducing government spending 10. When a firm can its capital equipment over a shorter period, it cuts its taxes A) B) C) D) appreciate; later appreciate; now depreciate; now depreciate; later 11. Figure: Laffer Curve 2 100 Average Tax Rate (%) 0 10 20 30 40 50 60...
5. Automatic adjustments to the government budget The following table provides some information on government expenditures (G) and tax revenues (T) at different levels of real GDP in a hypothetical economy. Throughout this problem you should assume that government transfers (TR) are zero. Real GDP (Billions of dollars) 460 Government Expenditures (G) (Billions of dollars) 72 72 72 Tax Revenues (T) (Billions of dollars) 70 72 74 540 Use the blue line (circle symbols) to plot the government expenditures schedule...
The following table shows the quantity of money supplied and the
quantity of money demanded for various interest rates
4. Study Questions and Problems #4 The following table shows the quantity of money supplied and the quantity of money demanded for various interest rates. Interest Rate (Percent) Demand for Money (Billions of dollars) Supply of Money (Billions of dollars) 500 100 300 500 500 700 900 500 500 500 The following graph depicts the money supply curve in orange. On...
4. The Laffer curve Government-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections. To understand the effect of such a tax, consider the monthly market for cigarettes, which is shown on the following graph. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph...
4. The Laffer curve Governments often place so-called sin taxes on goods or services such as cigarettes, alcohol, and pornography. These kinds of taxes are popular with politicians because they are usually more palatable to voters than income taxes. To understand the effect of such a tax, consider the monthly market for adult DVDS, which is shown on the following graph Use the graph input tool to help you answer the following questions. You will not be graded on any...
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