Why does the problem of the big tradeoff arise when the government engages in the process of redistributing income using taxes and transfers?
What will be an ideal response?
There are two reasons why the big tradeoff problem arises. First, in the process of transferring income from the people who have to those who do not have, an administrative cost is incurred by society. The result is that $1 taxed is not $1 transferred. Hence the effort to make incomes more equal decreases the average income. Second, taxing people's income is a disincentive to work, while taxing people's savings is a disincentive to accumulate capital. As a result, people work less and save less, both of which decrease the amount of goods and services produced and decrease people's income. Hence once again the effort to make incomes more equal decreases the average income.
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GDP can be measured as each of the following except:
A. total business revenues. B. total expenditure on final goods and services. C. the market value of production. D. incomes of capital and labor.
Caroline is an artist. She purchases canvas, paints, brushes, and accessories for $75. She sells one of her original paintings to an art gallery for $1,500, even though an art lover would pay $4,500 for that painting
How much value does Caroline add? A) $75 B) $1,425 C) $1,500 D) $4,425
If a person is taxed $100 on an income of $1,000 . taxed $200 on an income of $2,000 . and taxed $300 on an income of $3,000 . this person is paying a(n):
a. progressive tax. b. poll tax. c. regressive tax. d. excise tax. e. proportional tax.
Answer the following questions true (T) or false (F)
1. The term "trust" in antitrust refers to a board of trustees that has collusive control over different companies. 2. Economic efficiency requires that a natural monopoly's price be set corresponding to the quantity where marginal revenue equals marginal cost. 3. A decrease in the unemployment rate may be represented as a movement from a point on the production possibilities frontier to a point outside the frontier.