Many believe that fairness calls for higher income taxes on the wealthy. Using one of the "Ideas for Beyond the Final Exam," explain how higher taxes on the wealthy will affect output
Greater equality comes at the expense of reduced output. The reversal of Ronald Reagan's tax cuts will diminish the incentive of the wealthy to earn taxable income. They will work fewer hours or less hard, or they will accept nonwage benefits such as country club memberships, find more tax loopholes, or even seek illegal channels to reduce their tax liability.
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The interest rate is the price borrowers pay to borrow money. Key interest rates are controlled by the Federal Reserve System. If the Federal Reserve acts to reduce interest rates, economists would expect the demand for money to
A. increase. B. decrease. C. not change. D. be influenced by the interest rate, but with an uncertain effect.
Business's cost of changing prices is referred to as:
A) inflation tax. B) menu costs. C) intangible costs. D) shoeleather costs.
Costs as measured by accountants generally does not include
A) any of the opportunity costs of the firm. B) any measure of depreciation. C) the economic depreciation of the firm's equipment. D) any rental rates.
Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 10 percent. If the Federal Reserve reduces the required reserve ratio to 4 percent, then the bank can make a maximum loan of
A) $0. B) $4 million. C) $6 million. D) $10 million.