Your mayor wants voters in your town to approve a $24 million per year property tax break for Acme Manufacturing, in order to keep Acme from moving their operations out of state. Acme only produces output, and has a payroll, worth $6 million per year. In terms of income multiplier effects, under what circumstances might this tax break be a good idea?
If the income multiplier is greater than or equal to 4, then this tax break may be worth it. If Acme leaves,
incomes will fall initially by $6 million, but the multiplier effect on your town's economy will be much
larger. If the multiplier is 4 then the overall effect will be $24 million. Therefore, voters should be willing
to pay up to $24 million to keep Acme in town. If the income multiplier is less than 4, then the overall
effect on your town's economy will be less than $24 million, and the tax break is a bad idea .
You might also like to view...
Why do we need methods of allocating scarce resources?
What will be an ideal response?
Price discrimination is based on observable customer characteristics:
A. when a firm can distinguish consumers with a high versus low willingness to pay. B. when a firm offers a menu of alternatives, designed so that different customers will make different choices based on their willingness to pay. C. when a monopolist knows perfectly the customer's willingness to pay for each unit its sells and can charge a different price for each unit. D. in all cases.
Why did the money supply fall during the Great Depression?
a. The monetary base fell throughout the Great Depression. b. The amount of currency fell during the Great Depression. c. The ratio of currency/deposits fell during the Great Depression. d. The money multipier rose during the Great Depression. e. None of the above.
The wealth effect of a change in the price level refers to the fact that wealthier individuals tend to spend more on foreign goods
a. True b. False Indicate whether the statement is true or false