A payroll tax is imposed on two types of labor: carpenters and laborers. In the short run, the elasticity of labor supply of carpenters is much less elastic than the elasticity of labor supply of laborers. Which of the following is true?
A. In the short run, laborers will bear a larger share of the payroll tax than carpenters.
B. In the short run, carpenters and laborers will bear the same share of the payroll tax, but in the long run, laborers will bear a larger share of the payroll tax than carpenters.
C. In the short run, carpenters will bear a larger share of the payroll tax than laborers.
D. There is not enough information to determine the relative shares of the payroll tax for carpenters and laborers in either the short run or the long run.
Answer: C
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Gross domestic product is calculated by summing up the
A) total quantity of goods produced in the economy during a particular year. B) total quantity of final goods and services produced in the economy during a particular year. C) total market value of final goods produced in the economy during a particular year. D) total market value of final goods and services produced in the economy during a particular year.
When an economy experiences deflation, investment will:
A. decrease, because businesses will not take out loans that will increase in value over time. B. increase, because businesses will take out loans that will increase in value. C. decrease, because businesses will spend cash instead of borrowing it. D. increase, because businesses will spend cash instead of borrowing it.
From the early 1980's through the 1990's, the nominal interest rate
a. fell because the Fed got inflation under control. b. fell because the Fed let inflation get out of control. c. rose because the Fed got inflation under control. d. rose because the Fed let inflation get out of control.
Which of the following is an automatic stabilizer that moves the federal budget toward deficit during an economic contraction and toward surplus during an economic expansion?
A. Congress votes for a federal investment in infrastructure. B. corporate subsidies for green energy investments C. unemployment benefits D. a stimulus package that reduces personal income taxes