The authors of the text suggest that a comprehensive personal income tax with few loopholes would be efficient and equitable. What is their reasoning for this statement?
They argue that a personal income tax with few loopholes would be efficient because it would result in little or no change in economic behavior. Labor supply is largely unresponsive to a change in income taxes; therefore, the tax would result in little or no change in the amount of work.
The tax would be equitable on the grounds of vertical equity. With few loopholes, one can be sure that higher income persons would pay the same fraction of income that low-income persons would.
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A fall in the federal funds rate leads to
A) a decrease in the quantity of money. B) a rise in the real interest rate. C) a decrease in investment. D) a rise in the price level. E) a decrease in real GDP.
If pilots and flight attendants agree to wage and benefit reductions in the wake of the financial difficulties in the airline industry, what impact would this have on the supply and demand in the market for airline service, assuming no other changes
take place in this market?
Which of the following is NOT a generally accepted measure of the riskiness of an investment?
A) Standard deviation B) Expected value C) Variance D) none of the above
If firms were charged the full social opportunity cost of the resources they used, there would be
A. A need for government intervention. B. Market failure. C. No external costs. D. Government failure.