In which of the following examples is excess burden not present?
A. Harriet decides to give up her Saturday hours at her law office after income tax rates rise.
B. Rudolf still smokes three packs a day even after the excise tax on cigarettes rose 10 cents a pack.
C. Wilma reduced the automatic payroll deduction to her savings account after the tax on interest was imposed.
D. Harper decided to take a vacation in Bermuda rather than invest in stocks after the tax rate on capital gains was increased.
Answer: B
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Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential B. recessionary; higher; potential C. recessionary; lower; lower D. expansionary; higher; higher
Price ceilings frequently lead to
A. an accumulation of surpluses. B. an increase in the number of units purchased, moving along the demand curve. C. increased production, since producers respond to increased consumer demand at the low ceiling price. D. result in the development of black markets.
The liquidity-preference model was first introduced in:
A. 2008 by Ben Bernanke. B. 1936 by John Maynard Keynes. C. 1776 by Adam Smith. D. 1970 by John Kenneth Galbraith.
During a war, governments will sometimes draft people, most of whom are presently employed, into the army. An economist, computing the real cost of the war, would be sure to include which of the following items?
a. the value of the civilian goods no longer produced by the new soldiers b. the cost of feeding and clothing the new soldiers c. the dollar cost of the payroll d. the higher prices of civilian goods due to wartime shortages e. the cost of transporting the soldiers to combat