Why are income taxes on capital income more powerful than those on labor income?
What will be an ideal response?
Given positive inflation, what appears to be a moderate tax on interest income dramatically decreases the real after-tax interest rate, which is the interest rate that influences investment and saving plans. In particular, by driving a wedge between the real interest rate savers receive and firms pay, the tax on interest income decreases the supply of loanable funds, which lowers investment and saving in the economy.
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Normative analysis:
A. aims at determining only the economic consequences of a particular policy. B. does not depend on the analyst's values. C. addresses the question of whether a policy should be used. D. focuses on the actual effects of a policy.
Economic growth is generally measured as the percentage increase in a country's
A) real GDP. B) nominal GDP. C) annual employment rate. D) per-capita nominal GDP.
A competitive market is in equilibrium. Bagels and cream cheese are complementary goods. Suppose that the price for flour, which is used to produce bagels, increases. The equilibrium price of cream cheese ________, and the equilibrium quantity of cream cheese ________.
A) rises; decreases
B) rises; increases
C) falls; decreases
D) does not change; does not change
E) falls; increases
When a tax is imposed on a good, the resulting decrease in consumer surplus is always larger than the resulting decrease in producer surplus
a. True b. False Indicate whether the statement is true or false