Assume the government reduces your welfare check by $1 for every $2 that you earn on the job while on welfare. How will this tax affect your labor supply decisions? What is the implicit tax rate of such a policy?
What will be an ideal response?
The higher tax lowers the effective wage. The lower wage reduces the opportunity cost of leisure and discourages work. The implicit tax rate is 50%.
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In Figure 3-2, a point such as D
A. cannot be obtained with the current level of resources and technology. B. can never be obtained. C. can only be obtained by a capitalist society. D. represents a misallocation of resources.
The market that coordinates the exchange of productive inputs between the household and business sectors is the
a. stock market. b. goods and services market. c. resource market. d. loanable funds market.
In periods when GDP grows very rapidly for a long period, the actual unemployment rate will be ________ than the natural rate of unemployment.
A. lower B. higher C. the same D. more variable
________ can be altered to change the lending capacity of the banking system.
A. Points charged on a typical first mortgage B. The reserve requirement C. The dollar exchange rate D. Gold reserves