Suppose Political Party A proposes a tax cut on business income to stimulate the economy. Political Party B opposes the tax cut on business income asserting that it would only help businesses, not the average working man and woman
If you were hired as an economist for Political Party A, explain how the tax cut on business income would help the average working man and woman.
The multiplier effect would spread the effect of the tax cut in business income across average working men and women. First, the business income tax cut would increase the after-tax expected profitability of capital investment, leading businesses to purchase more capital goods, like factories, computers, and machine tools. These capital goods are produced by businesses that employ average working men and women. Second, the increase in income to the owners and workers of the businesses that produce the capital goods would lead to additional spending across many other businesses, increasing the income of these owners and workers. Their increase in income would lead to still more spending and the multiplier effect would spread across businesses and average working men and women.
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The slope of an indifference curve is called the
A. bliss gradient. B. happiness slope. C. average transformation rate. D. marginal rate of substitution.
Shares of stock and long-term debt, including corporate and government bonds and bank loans, are bought and sold on
A) the stock market. B) foreign exchange markets. C) capital markets. D) commodity markets.
Fashion Buyers II A buyer for a department store must decide on which designs the stores will carry before he knows what the demand will be in the coming season. Choosing a poorly demanded design means lots of unsold merchandise and losses that are
$200,000 on average. Passing on a highly demanded design means lots of unsold merchandise and missing out on profits that are $300,000 on average. So long as he is more than 40% confident that the design will be successful, carrying the design will minimize expected decision error costs. Why might he opt to carry designs only if he is more than, say, 50% confident of success?
A minimum wage law is a:
A. quantity restriction. B. customary norm without legal structure or protection. C. price ceiling. D. price floor.