![]() > Analyze the positive versus normative arguments in the following case. > Why does a reduction in taxes have a smaller multiplier effect than an increase in government spending of an equal amount? Assuming the MPC is 0.90, predict the effect on the economy of a $50 billion increase in government spending balanced by a $50 billion increase in taxes. > Consider an economy that is operating at the full employment level of real GDP. > What is the difference between discretionary fiscal policy and automatic stabilizers? How are federal budget surpluses and deficits affected by the business cycle? What observation can you make concerning the relationship between marginal and average tax rates? Calculate the average and marginal tax rates in the following table, and indicate whether the tax is progressive, proportional, or regressive.
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