Describe each of the principles governments consider when deciding which taxes to use
What will be an ideal response?
In deciding which taxes to use, a government will consider the effect of the tax on economic efficiency (whether the tax inflicts a small or large deadweight loss), the ability-to-pay principle (whether people who can afford to pay more do pay more), the horizontal-equity principle (whether people in the same economic situation are treated equally), the benefits-received principle (whether people receiving benefits from a government project are the ones paying the taxes and fees to support it), and other social objectives (such as curtailing activities with high external costs).
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A cash withdrawal from the banking system
A) decreases deposits. B) decreases reserves. C) decreases excess reserves. D) All of the above are correct.
If education produces positive externalities and the government does not intervene in the market, we would expect
a. the equilibrium price to be higher than the optimal price. b. the equilibrium quantity to be lower than the optimal level. c. the equilibrium quantity to be higher than the optimal level. d. both a and b are correct
A shortage will occur when
A. the price is below the market clearing level. B. the price is above the market clearing level. C. there is an excess quantity supplied. D. the price equals the market clearing level.
Utility refers to
A) the usefulness of a good or service. B) the value of a good or service. C) the want-satisfying power of a good or service. D) the degree to which a good or service is needed.