Edgar Browning and William Johnson, in a paper published in the Journal of Political Economy (1984), presented evidence that a one-dollar transfer to the bottom 40 percent of income distribution costs the top 60 percent nine dollars. If correct, this finding proves
A. the tax system is generating significant excess burdens.
B. these transfers are not worth the cost.
C. loopholes have to be closed.
D. the burden of the tax system is too great.
Answer: A
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Which of the following would cause an increase in aggregate demand in the short run?
A) an increase in taxes B) an increase in the supply of money C) a decrease in the price level D) a crop failure
Using average price and average quantity, calculate the price elasticity of demand if a price rise from $8 to $10 and decreases the quantity demanded from 20 units to 15 units. The price elasticity of demand equals
A) 2.5. B) 1.29. C) 0.78. D) 0.06
A Keynesian economist would expect a supply-side tax cut to shift
A. only the aggregate supply curve outward. B. only the aggregate demand curve outward. C. both the aggregate demand and aggregate supply curves outward. D. the aggregate supply curve outward and the aggregate demand curve inward.
An externality
A) may be positive or negative. B) means a rapidly rising cost borne by consumers. C) is the cost of producing a good outside the United States. D) is the indirect cost, the overhead, of producing a product.