Explain how a tax cut effects employment, labor productivity, and potential GDP

What will be an ideal response?


A tax cut increases the incentive to work thereby increasing the labor supply and employment. A tax cut also increases the incentive to save and invest thereby increasing the quantity of capital which in turn increases productivity. These two items, increased employment and increased labor productivity, both result in an increase in potential GDP.

Economics

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A compensation package offered by employers often includes

A. wages. B. health benefits. C. vacations. D. pensions. E. all of these answer options are correct.

Economics

U.S. goods will become relatively less expensive than goods from other countries if prices were to:

A. increase in the United States only. B. decrease in the United States only. C. increase in the United States and foreign countries at the same rate. D. decrease in the United States and foreign countries at the same rate.

Economics

The major shortcoming of a barter economy is

A) the requirement of a double coincidence of wants. B) the requirement of specialization and exchange. C) that goods and services are not traded. D) that money loses value from inflation.

Economics

Using the midpoint method to calculate the price elasticity of demand eliminates the problem of computing:

A) total revenue when price falls and demand is elastic. B) total revenue when price falls and demand is inelastic. C) different elasticities, depending on whether price decreases or increases. D) different elasticities, because price and quantity are inversely related on the demand curve.

Economics