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 be true of the labor supply elasticity and why. (3 points)
d. What is the evidence on labor supply elasticity and what does this imply about income and substitution effects? (3 points)
e. Explain, briefly, why tax cuts tend to increase government budget deficits and tax increases tend to lower them. (2 points)
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3. This question concerns government and the Laffer Curve.
a. Draw the Laffer Curve (with the...
The Laffer curve is said to be based on O elasticity-sided economics. supply-side economics. indifference-curve economics....
The Laffer curve is said to be based on O elasticity-sided economics. supply-side economics. indifference-curve economics. O demand-side economics. Which of the following is consistent with the idea underlying the Laffer curve? Tax cuts encourage people to work more, which increases the labor gupply. Whether tax cuts impact supply or tax cuts impact demand is dependent on where the economy is initially at on the Laffer curve. Because elasticities determine the size of the deadweight loss, elasticities can be used...
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...
Problem 5 "Laffer Curve" (20 points) 1. (6 pts) What is Laffer Curve? 2. (8 pts)...
Problem 5 "Laffer Curve" (20 points) 1. (6 pts) What is Laffer Curve? 2. (8 pts) As Canada recovers from the economic challenges brought on by the COVID pandemic, the federal government will make choices that will cause tax rates to rise or fall. This will cause a change in Canada's position on the Laffer Curve. Explain what will happen to Canada's position on the Laffer Curve for both the cases where the tax rates rise and when they fall....
Problem 5 “Laffer Curve” (20 points) (6 pts) What is Laffer Curve? (8 pts) As Canada...
Problem 5 “Laffer Curve” (20 points) (6 pts) What is Laffer Curve? (8 pts) As Canada recovers from the economic challenges brought on by the COVID pandemic, the federal government will make choices that will cause tax rates to rise or fall. This will cause a change in Canada’s position on the Laffer Curve. Explain what will happen to Canada’s position on the Laffer Curve for both the cases where the tax rates rise and when they fall. (6 pts)...
8. The Laffer curve Suppose that the following curve shows tax revenues at various tax rates...
8. The Laffer curve Suppose that the following curve shows tax revenues at various tax rates in a hypothetical economy, TAX REVENUE (Billions of dollars) 100 INCOME TAX RATE (Percent) Complete the following table by indicating what the government should do in order to maximize tax revenues if it is operating at each of the points listed. Point Raise Tax Rates Lower Tax Rates Keep Current Tax Rates Oo
1. (6 pts) What is Laffer Curve? 2. (8 pts) As Canada recovers from the economic...
1. (6 pts) What is Laffer Curve? 2. (8 pts) As Canada recovers from the economic challenges brought on by the COVID pandemic, the federal government will make choices that will cause tax rates to rise or fall. This will cause a change in Canada's position on the Laffer Curve. Explain what will happen to Canada's position on the Laffer Curve for both the cases where the tax rates rise and when they fall. 3. (6 pts) What will happen...
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...
factors that shift the AD Curve include A) government purchases B) autonomous investment C) taxes D)...
factors that shift the AD Curve include A) government purchases B) autonomous investment C) taxes D) all of the above E) none of the above 33. If government cuts taxes A) after tax income should increase shifting AD to the left to a lower cu B) after tax income should increase shifting AD to the right to a higher eq output C) after tax income and the equilibrium level of output remain unchanged D) after tax income remains unchanged but...
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...
** LUIE detination Fiscal policy Budget deficit Budget surplus National Debt Marginal Tax Rate Progressive tax...
** LUIE detination Fiscal policy Budget deficit Budget surplus National Debt Marginal Tax Rate Progressive tax Regressive tax Deficit Dove Deficit Hawk Automatic Stabilizers Laffer curve 1. Use the loanable funds model to explain why classicals argue that government deficits crowd out private spending. Explain why Keynesians argue that government deficits crowd in private spending. 2. Explain the logic behind "trickle down economics" (i.e the supply-side argument in favor of cutting taxes on the wealthy). Explain why Keynesians don't believe...
The Laffer curve is said to be based on O elasticity-sided economics. supply-side economics. indifference-curve economics. O demand-side economics. Which of the following is consistent with the idea underlying the Laffer curve? Tax cuts encourage people to work more, which increases the labor gupply. Whether tax cuts impact supply or tax cuts impact demand is dependent on where the economy is initially at on the Laffer curve. Because elasticities determine the size of the deadweight loss, elasticities can be used...
Problem 5 "Laffer Curve" (20 points) 1. (6 pts) What is Laffer Curve? 2. (8 pts) As Canada recovers from the economic challenges brought on by the COVID pandemic, the federal government will make choices that will cause tax rates to rise or fall. This will cause a change in Canada's position on the Laffer Curve. Explain what will happen to Canada's position on the Laffer Curve for both the cases where the tax rates rise and when they fall....
8. The Laffer curve Suppose that the following curve shows tax revenues at various tax rates in a hypothetical economy, TAX REVENUE (Billions of dollars) 100 INCOME TAX RATE (Percent) Complete the following table by indicating what the government should do in order to maximize tax revenues if it is operating at each of the points listed. Point Raise Tax Rates Lower Tax Rates Keep Current Tax Rates Oo
1. (6 pts) What is Laffer Curve? 2. (8 pts) As Canada recovers from the economic challenges brought on by the COVID pandemic, the federal government will make choices that will cause tax rates to rise or fall. This will cause a change in Canada's position on the Laffer Curve. Explain what will happen to Canada's position on the Laffer Curve for both the cases where the tax rates rise and when they fall. 3. (6 pts) What will happen...
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...
factors that shift the AD Curve include A) government purchases B) autonomous investment C) taxes D) all of the above E) none of the above 33. If government cuts taxes A) after tax income should increase shifting AD to the left to a lower cu B) after tax income should increase shifting AD to the right to a higher eq output C) after tax income and the equilibrium level of output remain unchanged D) after tax income remains unchanged but...
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...
** LUIE detination Fiscal policy Budget deficit Budget surplus National Debt Marginal Tax Rate Progressive tax Regressive tax Deficit Dove Deficit Hawk Automatic Stabilizers Laffer curve 1. Use the loanable funds model to explain why classicals argue that government deficits crowd out private spending. Explain why Keynesians argue that government deficits crowd in private spending. 2. Explain the logic behind "trickle down economics" (i.e the supply-side argument in favor of cutting taxes on the wealthy). Explain why Keynesians don't believe...
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