What answers are required before the notions of horizontal and vertical equity become meaningful?
What will be an ideal response?
First, we have to have a way in which ability to pay is measured. That is, we have to know what the "best" tax base is. Second, if someone has a greater ability to pay than another, how much more should that person contribute? Answering these questions makes horizontal and vertical equity more meaningful.
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Which of the following economic activities is ignored in GDP accounts?
A) The market value of medical services B) The market value of educational services C) The market value of illegal drugs D) The market value of prescription drugs E) The market value of the services associated with used-car dealers
Suppose that the Bank of Japan buys yen-denominated assets with U.S. dollar assets. Everything else held constant, this transaction will cause ________ in the foreign assets held by the Federal Reserve and ________ in the U.S. monetary base
A) an increase; an increase B) an increase; a decrease C) a decrease; an increase D) a decrease; a decrease
An increase in the demand for the Brazilian real induces
A) an increase in the demand for Brazilian goods. B) a decrease in the supply of dollars. C) an increase in the real price of a dollar. D) an increase in the dollar price of a real.
If everyone in an economy buys and sells goods at market-wide prices:
A. people will pay the same prices, so everyone's marginal rate of substitution will be the same. B. people will pay the same prices, but will have different marginal rates of substitution. C. people will pay different prices, but will have the same marginal rates of substitution. D. people will pay different prices and therefore will have different marginal rates of substitution.