What is the difference between tax cuts imposed on higher-income households compared with lower- and middle-income households? Discuss the implications for the multiplier and the effectiveness of the tax cuts for boosting GDP
Higher-income households tend to save a higher fraction of their incomes than lower- and middle-income households. That is, high-income households have a lower MPC. This means that they have a lower multiplier. When the government reduces taxes for all Americans, high-income households save a higher portion of their tax cut than do low- and middle-income households.
For a tax cut to affect GDP, households have to spend the tax cut on goods and services. If households save most of the tax cut, then GDP will not increase by as much. However, if the tax cut were targeted toward households that spend most of their income, the effects on GDP would be larger.
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Omar and John can fix computers or write computer programs. The table above shows the number of computers they can fix and the lines of code they can write in a day
a. Who, if anyone, has the absolute advantage? b. Who has the comparative advantage in fixing computers? Why? c. Who has the comparative advantage in writing programs? Why?
Competition between oligopolists drives:
A. price and profits down to below the monopoly level. B. price and profits down to the perfect competition level. C. some firms out until the market becomes a monopoly. D. collusion to happen frequently.
In long-run equilibrium, a monopolistically competitive firm's demand curve will be tangent to its average cost curve
a. True b. False Indicate whether the statement is true or false
Under a system of flexible exchange rates, an increase in demand for a nation's currency in the foreign exchange market will: a. cause the nation's currency to appreciate
b. make it more expensive for the nation to import goods. c. cause the nation's balance on current account to shift toward a deficit. d. make it less expensive for foreigners to buy the nation's goods.