The larger the wealth effect, the less likely it is that a wage tax will give rise to a Laffer curve that has a downward sloping portion.
Answer the following statement true (T) or false (F)
True
Rationale: The wealth effect causes workers to work more as the wage tax increases, whereas the substitution effect causes them work less. The larger the wealth effect, the more likely it is that the worker will not reduce the amount of time spent working as wage taxes rise -- and thus the less likely it is that tax revenues fall as the wage tax increases.
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If the price level rises but the money wage rate does not, then firms will hire ________ labor and the quantity of real GDP supplied will ________
A) more; increase B) the same amount of; not change C) less; decrease D) more; not change E) less; increase
Should European nations which are not currently using the euro choose to adopt the euro as their currency, these countries would risk giving up the ability to use ________ to stabilize their economies in the event of a recession
A) contractionary fiscal policy B) expansionary monetary policy C) expansionary fiscal policy D) contractionary monetary policy
Political decision making tends to be biased toward the adoption of programs that have
What will be an ideal response?
According to a study by economists Ian Ayres and Steven Levitt, the division of the total benefit of the Lojack to its owners and all other car owners is:
A. 100 percent to the car owner with a Lojack, 0 percent to other car owners. B. 10 percent to the car owner with a Lojack, 90 percent to other car owners. C. 75 percent to the car owner with a Lojack, 25 percent to other car owners. D. 50 percent to the car owner with a Lojack, 50 percent to other car owners.