Why do many economists rate the income tax high in efficiency and equity terms?
What will be an ideal response?
The income tax could potentially reduce labor supply, but in fact the effect is likely to be small. Thus the tax is relatively efficient. (The effect on reducing savings is also thought to be small.) The tax can be made as progressive as society wishes, so it also scores high on equity grounds.
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For a consumer, a budget line shows the boundary between
A) what is desired and what is not desired. B) what is needed and what is not needed. C) what is affordable and what is not affordable. D) what is available and what is not available.
Which of the following is TRUE about exchange rates?
A) They should not be volatile because they will determine the economic climate. B) They are generally more volatile than stock prices. C) They are more volatile than several underlying factors that move them such as money supplies and fiscal variables. D) They should be volatile because to correct price signals they adjust quickly in response to economic news, but they are generally less volatile than stock prices. E) They never overreact to economic news.
Higher wage rates allow a person to reduce the hours worked without losing income. This is known as the
A. Law of diminishing marginal utility. B. Law of diminishing marginal leisure. C. Income effect. D. Substitution effect.
According to the textbook, the evidence indicates that NAFTA has:
A. reduced the employment of unskilled workers in the United States significantly. B. reduced the wages of skilled workers in the United States. C. stopped illegal immigration from Mexico. D. not significantly reduced the employment of unskilled workers in the United States.