First, define and explain the cyclically adjusted deficit. Second, explain what effect a recession caused, for example, by a reduction in consumer confidence will have on the size of the cyclically adjusted deficit
What will be an ideal response?
The cyclically adjusted deficit is the deficit that would occur if the economy were operating at the natural level of output. In terms of notation, it would be represented as G - T0 - tYN where T0 is autonomous taxes, YN is the natural level of output, and t is the average income tax rate. Deviations in output from YN will not cause changes in the cyclically adjusted deficit. So, a consumption-led recession will have no effect on this particular measure of the budget.
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Compare and contrast the tax base with the tax rate structure
What will be an ideal response?
Assuming that generic brands are inferior goods, an increase in consumer income, other things being equal, will cause a(n):
a. leftward shift in the demand curve for generic goods. b. downward movement along the demand curve for generic goods. c. rightward shift in the demand curve for generic goods. d. upward movement along the demand curve for generic goods.
What are the factors that will determine the size of some future required tax increase to pay off all debt?
What will be an ideal response?
An increase in the price of labor will, in the short-run, cause a competitive firm's
a. marginal cost to increase, the quantity it sells to decrease and therefore reduce the quantity demand of labor. b. price of its output to increase, leaving demand for labor unchanged. c. marginal revenue product of labor to decrease and therefore reduce demand for labor. d. marginal revenue product of labor to increase and therefore increase demand for labor.