Explain why some argue that income tax loopholes primarily benefit the rich.
What will be an ideal response?
Since the personal income tax is progressive, the wealthy pay a higher marginal tax rate than do the poor. If the rich can find a way to reduce taxable income by a dollar, they reduce their tax bill by more than would be true for a lower income person. Municipal bond interest is tax-free, which saves the wealthy person who holds municipal bonds more in taxes than the poor who cannot afford municipal bonds. Housing expenses are tax deductible, which results in a larger tax saving for those who can afford to own their own homes.
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Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential B. recessionary; higher; potential C. recessionary; lower; lower D. expansionary; higher; higher
The relationship that tells us how much a person intends to spend at various levels of income is
A) the expenditure function. B) the consumption function. C) the buying function. D) the spending function.
The variable that links the market for loanable funds and the market for foreign-currency exchange is
a. net capital outflow. b. national saving. c. exports. d. domestic investment.
Suppose Country A, a labor-abundant country, produces only wheat and cloth. The following equations illustrate the prices and costs of wheat and cloth in the country. The numbers indicate the amounts of labor and land needed to produce a unit of wheat and cloth. 'W' is the wage rate and 'r' is the rental rate of land.Price of wheat = 1w + 2rPrice of cloth = 2w + 1rIf the initial prices of wheat and cloth are $3 per unit then
A. the wage rate and the rental rate are $2 and $3, respectively. B. the wage rate and the rental rate are $1 and $2, respectively. C. both the wage rate and the rental rate are equal to $2. D. both the wage rate and the rental rate are equal to $1.