One criticism of the corporate income tax is that
A. it is so complex to administer that corporate income taxes are rarely collected by the Internal Revenue Service.
B. it is too regressive.
C. a portion of the corporations' tax burden is passed on to consumers via higher prices for goods and services and to workers via lower wages.
D. it is too flat.
Answer: C
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In the income-expenditure model, the 45-degree line
A) shows total expenditures at various price levels. B) marks all equilibrium output levels. C) is also called the planned expenditures line. D) is the locus of all the points for which output equals expenditures.
According to Keynesian theory, a recessionary gap can be closed using expansionary fiscal policy
Indicate whether the statement is true or false
The basic task of economics is to
A) explain the tax and expenditure policies of governments. B) report on key economic indicators, such as GDP and unemployment. C) explain the forces that underlie human decision making. D) predict the future movements of the stock market.
Exhibit 17-5 Short-run and long-run Phillips curve
Suppose the government shown in Exhibit 17-5 uses contractionary monetary policy to reduce inflation from 9 to 6 percent. If people have rational expectations, then:
A. the economy will remain stuck at point E1. B. the natural rate will permanently increase to 8 percent. C. unemployment will rise to 8 percent in the short run. D. unemployment will remain at 6 percent as the inflation rate falls.