An economist in an economy struggling with a low level of national saving suggested that the best way to increase the national saving of the country is by increasing net taxes. Which of the following statements points out a drawback in his argument?
a. While an increase in net taxes will indeed increase public saving, it will also lead to a corresponding decrease in household saving, meaning the net effect on national saving will be zero.
b. An increase in net taxes means the government will have more money on hand. By keeping the government spending constant, the country will now have extra funds that it can put into savings.
c. An increase in net taxes means that consumers will have less money in their pockets and thus less money to put into savings. As a result, national saving will decrease.
d. An increase in net taxes means the government will have more money on hand. As a result, there is very little chance that there will be any extra funds for national saving.
a
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A) a decline in the demand for real balances. B) an increase in the demand for real balances. C) no change in the demand for real balances. D) no change in the demand for real balances only if the income elasticity of real money demand is zero.
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A) market failure B) government failure C) changes in the social contract D) rent-seeking by bureaucrats.
Which of the following could be considered to be a secondary effect caused by making drugs such as marijuana, cocaine, heroin and meth illegal?
a. The higher prices that result from making drugs illegal results in more property theft by users to afford the drugs. b. The usage of police and law enforcement resources to enforce drug laws leads to lower enforcement (and thus a higher amount) of other crimes. c. Without the ability to use the legal system to enforce contracts in these underground markets, violence between buyers and sellers often results when one party to a drug deal does not live up to their end of the bargain, thus the amount of violence in society increases by making drugs illegal. d. When supplying the demand for a product that has been decreed illegal by the government, the supplier has no incentive to refrain from other illegal and equally punishable behaviors, thus increasing crime by making drugs illegal. e. All of the above would be considered valid and important secondary effects of making drugs illegal.