Which of the following best explains why high marginal tax rates retard output?
a. High marginal tax rates reduce the incentive to earn, invest, and use resources efficiently.
b. High marginal tax rates will encourage foreign investment.
c. High marginal tax rates will reduce budget deficits and lower interest rates.
d. High marginal tax rates encourage people to substitute more-desired nondeductible goods for less-desired tax-deductible goods.
A
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The key assumption of the liquidity premium theory is that investors
A) view bonds of different maturities as perfect substitutes. B) view bonds of different maturities as completely unsubstitutable. C) always choose the bond with the highest expected return, regardless of maturity. D) care about both expected returns and time to maturity.
The demand curve for a monopolistically competitive firm is
A) the same as the industry demand curve. B) more elastic than the demand curve of the perfectly competitive firm. C) less elastic than the demand curve of the perfectly competitive firm. D) horizontal.
The owners of preferred stock
A) receive preferential treatment in the payment of dividends. B) have the same voting rights as owners of common stock. C) are the original owners of the corporation. D) have the same rights as bondholders.
In the simple circular-flow diagram, with households and firms, GDP can be computed a. as the income received by households, in the form of wages, rent and profit. b. as the income received by households in the form of wages
c. as the payments made by firms for labor. d. as the profits received by households.