Homework Answers
Option A.
- The Ricardian equivalence theorem is an economic theory that proposes that the overall demand of an economy is not affected by the government deficits and their Increased spending to finance their debts.
- According to this theorem, whatever be the timing of taxes, the consumption spending remains the same or it does not change.
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The Ricardian equivalence theorem says o whatever the timing of taxes, consumption is the same. O higher government exp...
If Ricardian equivalence proposition is true, a budget deficit resulting from a tax cut will have Ono effect on governm...
If Ricardian equivalence proposition is true, a budget deficit resulting from a tax cut will have Ono effect on government expenditures. no effect on current account because it does not affect national saving. no effect on current account because people expect to pay lower taxes in the future. no effect on current account because people expect to increase their consumption.
3 Consumption Taxes and Ricardian Equiv- alence (8 points) Suppose a consumer has income y in...
3 Consumption Taxes and Ricardian Equiv- alence (8 points) Suppose a consumer has income y in period 1, y' in period 2, and faces a proportional tax on consumption. That is if consumption is c in period 1 'and c' in period 2, the consumer pays a tax sc on period 1 consumption and s'c' ou period 2 consumption. Thuss and s' represent the rate of sales tax in each period. The government wishes to collect total tax revenue in...
i understand why a decrease in tax will increaseconsumotion but i dont understand why a future...
i understand why a decrease in tax will increaseconsumotion
but i dont understand why a future tax raise will also increase
consumption.
in this case, does ricardian equivalence hold? thank you
6:41 PM Wed Oct 30 TODO+ Xaxes) may be advantageous because 54% + 8 0 A) it discourages credit-constrained consumers from borrowing too much. B) it increases the welfare of credit-constrained consumers. C) it eliminates the problems that cause credit market imperfections. D) it encourages more private savings. E)...
Starting with the dynamic consumption model seen in class, consider the case where the consumer is...
Starting with the dynamic consumption model seen in class, consider the case where the consumer is not facing lump-sum taxes, but proportional taxes. The tax is a linear tax on consumption. In first period, the consumer pays a tax t:c, in the second period T'.d. Note that t and t' need not be identical. The government wants to collect a total amount of revenue, which has a present value of R=G+ Now the government reduces t and increases t' in...
22. Why is the multiplier for a change in taxes smaller than for a change in spendi...
22. Why is the multiplier for a change in taxes smaller than for a change in spending? a. A change in taxes has no effect on aggregate demand, only on aggregate supply. b. A change in taxes directly affects government spending as well, lowering the multiplier. c. A change in taxes affects spending directly, but at a slower rate than spending does. d. A change in taxes affects disposable income and then consumption rather than spending directly....
Question 40 (1 point) ✓ Saved If government spending increases and taxes decrease: implicit liabilities will...
Question 40 (1 point) ✓ Saved If government spending increases and taxes decrease: implicit liabilities will increase. O implicit liabilities will decrease. the public debt will increase. the public debt will decrease. new 1 Question 30 (1 point) The aggregate demand curve: slopes downward for the same reasons that an ordinary demand curve does. slopes downward in part because when the price level falls the real wealth of the public falls, and this induces people to change their consumption. slopes...
Why is the multiplier for a change in taxes smaller than for a change in spending?...
Why is the multiplier for a change in taxes smaller than for a change in spending? a. A change in taxes has no effect on aggregate demand, only on aggregate supply. b. A change in taxes directly affects government spending as well, lowering the multiplier. c. A change in taxes affects spending directly, but at a slower rate than spending does. d. A change in taxes affects disposable income and then consumption rather than spending directly. e. All of the...
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...
1.Consider a closed economy with no taxes, whose consumption function, investment level & government spending level...
1.Consider a closed economy with no taxes, whose consumption function, investment level & government spending level are given by the following equations: C= 5,000 + .80Y I= 9,000 G= 2000 whereGrepresents government spending. The equilibrium condition is, as always, that the value of the economy’s output (Y) must be matched by aggregate demand, but now aggregate demand contains a third element, G. a. What is the equilibrium level of aggregate output for this economy? b. What is the saving function for this...
13./The economy has GDP is Y - 160; Consumption is C = 120 - 500 r; Taxes are T = 10; and Government purchases are...
13./The economy has GDP is Y - 160; Consumption is C = 120 - 500 r; Taxes are T = 10; and Government purchases are G = 20 Investment is I = 100 - 1500 r; a. Is there a budget deficit or surplus? (circle) How much is the budget or surplus? G-T: 20-10 10 spub=-10 G>T then deficit - b. What is the supply equation? What is the demand equation? Y-C-G = 160-190-soor-20 r-c-G Supply: 20-50or -(-6) Demand: 100-1500...
If Ricardian equivalence proposition is true, a budget deficit resulting from a tax cut will have Ono effect on government expenditures. no effect on current account because it does not affect national saving. no effect on current account because people expect to pay lower taxes in the future. no effect on current account because people expect to increase their consumption.
3 Consumption Taxes and Ricardian Equiv- alence (8 points) Suppose a consumer has income y in period 1, y' in period 2, and faces a proportional tax on consumption. That is if consumption is c in period 1 'and c' in period 2, the consumer pays a tax sc on period 1 consumption and s'c' ou period 2 consumption. Thuss and s' represent the rate of sales tax in each period. The government wishes to collect total tax revenue in...
i understand why a decrease in tax will increaseconsumotion
but i dont understand why a future tax raise will also increase
consumption.
in this case, does ricardian equivalence hold? thank you
6:41 PM Wed Oct 30 TODO+ Xaxes) may be advantageous because 54% + 8 0 A) it discourages credit-constrained consumers from borrowing too much. B) it increases the welfare of credit-constrained consumers. C) it eliminates the problems that cause credit market imperfections. D) it encourages more private savings. E)...
Starting with the dynamic consumption model seen in class, consider the case where the consumer is not facing lump-sum taxes, but proportional taxes. The tax is a linear tax on consumption. In first period, the consumer pays a tax t:c, in the second period T'.d. Note that t and t' need not be identical. The government wants to collect a total amount of revenue, which has a present value of R=G+ Now the government reduces t and increases t' in...
Question 40 (1 point) ✓ Saved If government spending increases and taxes decrease: implicit liabilities will increase. O implicit liabilities will decrease. the public debt will increase. the public debt will decrease. new 1 Question 30 (1 point) The aggregate demand curve: slopes downward for the same reasons that an ordinary demand curve does. slopes downward in part because when the price level falls the real wealth of the public falls, and this induces people to change their consumption. slopes...
Why is the multiplier for a change in taxes smaller than for a change in spending? a. A change in taxes has no effect on aggregate demand, only on aggregate supply. b. A change in taxes directly affects government spending as well, lowering the multiplier. c. A change in taxes affects spending directly, but at a slower rate than spending does. d. A change in taxes affects disposable income and then consumption rather than spending directly. e. All of the...
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...
13./The economy has GDP is Y - 160; Consumption is C = 120 - 500 r; Taxes are T = 10; and Government purchases are G = 20 Investment is I = 100 - 1500 r; a. Is there a budget deficit or surplus? (circle) How much is the budget or surplus? G-T: 20-10 10 spub=-10 G>T then deficit - b. What is the supply equation? What is the demand equation? Y-C-G = 160-190-soor-20 r-c-G Supply: 20-50or -(-6) Demand: 100-1500...
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