A year ago a country reduced the tax rate on all interest income from 40% to 10%. During the year private saving was $600 billion as compared to $500 billion the year before the tax reform. Taxes collected on interest income fell by $150 billion. Assuming no other changes in government revenues or spending which of the following is correct?
a. the substitution effect was larger than the income effect; national saving rose
b. the substitution effect was larger than the income effect; national saving fell
c. the income effect was larger than the substitution effect; national saving rose
d. the income effect was larger than the substitution effect; national saving fell
b
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In the short run, a competitive firm has a marginal product of labor, MPL = 5L-0.5. The output price is $10 per unit and the wage is $7 per hour. The short-run labor demand curve for the firm is
A) 5L-0.5. B) 15L-0.5. C) 35L-0.5. D) 50L-0.5.
If the income elasticity of hamburgers is -0.8 for John, then his share of income spent on hamburgers will ________ when his income increases
A) increase B) decrease C) remain the same D) Not enough information
Demand for cocaine is unit Elastic, price of cocaine were to rise 10%,
a. Quantity consumed would fall 10% b. Dealer income from the sale of cocaine would fall 10% c. ANSWER is both FALSE
Which of the following statements is a correct interpretation of some economists' views?
A. When the rich do well, the total pie is increased so much that the benefits that trickle down to the poor are greater than the proceeds they would get from redistribution. B. When the government gives income to the head of a household, other members of the household remain in need. C. When the rich do well, the total pie is decreased, so that the poor are worse off than they were before. D. When the incomes of the poor are increased, the poor purchase more goods and services, and this causes lower profits.