A higher marginal income tax rate reduces incentives to work because:
A. leisure and other non-market activities aren't taxed, and so their relative price goes up.
B. the opportunity cost of leisure remains constant while after-tax wages fall.
C. the opportunity cost of leisure increases with the marginal income tax rate.
D. leisure and other non-market activities aren't taxed, and so their relative price goes down.
Answer: D
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A regressive tax means that if someone earning $25,000 pays $5,000, someone earning $50,000 must pay
A. less than $5,000. B. more than $15,000 but less than $20,000. C. less than $10,000. D. more than $10,000 but less than $15,000.
Gross private domestic investment does not include:
A. spending for new houses. B. spending to build up inventories. C. unintentional inventory investment. D. spending on employee salaries.
The calculation of the final goods and services sold in an economy would NOT include
A) the purchase of a lawnmower by a household. B) General Motors' purchases of tires for new automobiles. C) Ford Motor Company's purchase of a new industrial robot to be used to produce cars. D) the purchase of a service by a household.
Changes in business inventories
A) are included in gross but not in net investment. B) can either be positive or negative. C) are not included in GDP because they are not sold to anyone. D) are only partly included in GDP because part of these are holdings of intermediate goods.