What is the flypaper theory of tax incidence? This theory is typically wrong. Why?
What will be an ideal response?
This is an axiom that maintains that the burden of any tax sticks where the government puts it. This theory is wrong because when people change their behavior on account of a tax, they often shift the burden of the tax onto someone else. Failure to grasp this basic point has led to all sorts of misguided tax legislation in which members of Congress or state legislatures, thinking they were placing a tax burden on one group of people, inadvertently placed it squarely on another.
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The equation of exchange is a formula indicating that the number of monetary units times
A) the number of times each monetary unit is spent on final goods and services is identical to the price level times real GDP. B) real GDP is identical to the price level times the number of times each monetary unit is spent on final goods and services. C) nominal GDP is identical to the price level times the number of times each monetary unit is spent on final goods and services. D) the price level is identical to the number of times each monetary unit is spent on final goods and services times real GDP.
Which of the following formulas would you use to calculate the nominal wage rate?
A) nominal wage rate = real wage rate × CPI B) nominal wage rate = (real wage rate × CPI) × 100 C) nominal wage rate = (real wage rate × CPI) ÷ 100 D) nominal wage rate = (real wage rate ÷ CPI) × 100 E) nominal wage rate = real wage rate ÷ CPI
What is the difference between explicit costs and implicit costs? List three examples each of explicit costs and implicit costs that may be experienced by a small business
What will be an ideal response?
Use the following statements to answer the question:
I. Consider the problem of negotiating the price of a rug that costs $100 to make. If there are two buyers (one with a maximum willingness-to-pay of $200 and one with a maximum willingness-to-pay of $250 ), then the situation is no longer a constant sum game. II. The likely outcome from the game described in statement I is that the second buyer will bid a price slightly above $200 (e.g., $201 ) to win the rug. A) I and II are true. B) I is true and II is false. C) II is true and I is false. D) I and II are false.