What argument do you believe policymakers use in some states to justify exempting unprepared food from sales tax? (Hint: the income elasticity of food is less than one)
What will be an ideal response?
Since the income elasticity of food is less than one that means that expenditure on food tends to represent a higher portion of a poor person's income. By making unprepared foods exempt from sales tax policymakers are attempting to reduce the regressivity of the sales tax overall.
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Rent controls are designed to protect consumers from high rents.
Answer the following statement true (T) or false (F)
Capital is
A) liquidity. B) interest. C) produced goods that can be used to produce future goods. D) non-existent in a socialist economy. E) all of the above.
Suppose you purchase a bond with a coupon of $30 for $1025. You sell it one year later for $1050. What rate of return did you earn? Report a percentage with two decimal places
What will be an ideal response?
Economic analysis suggests that countercyclical macro-policy will
a. be difficult to time properly because of uncertainty about the future direction of the economy. b. be difficult to implement because we do not know whether monetary policy is transmitted through the interest rate, or whether it affects aggregate demand directly. c. reduce the natural rate of unemployment when macro-policy is persistently expansionary. d. help reduce economic instability if, and only if, we are willing to tolerate double-digit inflation.