What is the impact on current consumption of a temporary tax cut according to: a. the...

What is the impact on current consumption of a temporary tax cut according to:

a.	the Keynesian consumption function?
b.	the permanent-income hypothesis?

Explain how paying efficiency wages can help employers overcome both moral hazard and adverse selection problems in employment.

Expert Solution

Rahul Sunny answered 3 years ago

According to life-cycle models of consumption, a $1000 tax cut would have the largest impact on consumption spending when

According to life-cycle models of consumption, a $1000 tax cut would have the largest impact on consumption spending whena. The tax cut is permanent b. The tax cut is temporary, and tax rates will steadily rise in subsequent years c. The tax cut is temporary, and tax rates will suddenly jump in subsequent years d. None of the above – A $1000 tax cut has the same impact on consumption spending regardless of whether it is temporary or permanent7. An...

hOW WOULD THIS TAX CUT IMPACT THE National budget and the national debt ?what are the...

hOW WOULD THIS TAX CUT IMPACT THE National budget and the national debt ?what are the pros and cons of running a deficit?would you support such a tax cut and for whom should we impose the tax cut?

How would this tax cut impact the National Budget and the National Debt? What are the...

How would this tax cut impact the National Budget and the National Debt? What are the pros and cons of running a deficit? Would you support such a tax cut and for whom should we impose the tax cut?

1. In the IS-LM model we studied, a cut in tax will make consumption ____ and...

1. In the IS-LM model we studied, a cut in tax will make consumption ____ and investment ____. rise, not change fall rise, not change, rise rise, rise fall, fall rise, fall 2. In the AS-AD model of chapter 10, a rise in velocity leads to a ___ in the short run and a ____ in the long run. rise in output, rise in price fall in output, rise in price rise in output, fall in price rise in price,...

Describe the idea of consumption smoothing, and discuss how it relates to using temporary tax cuts...

Describe the idea of consumption smoothing, and discuss how it relates to using temporary tax cuts as stimulative fiscal policy during a recession.

A big tax on sugary drinks in Mexico has cut consumption. Sellers passed on the entire...

A big tax on sugary drinks in Mexico has cut consumption. Sellers passed on the entire tax in higher prices to the consumers of these sugary drinks. The largest consumers of these drinks are the poor who suffer from diabetes and obesity. Source: The New York Times, October 19, 2015 a. What is the elasticity of demand for sugary drinks? Why? b. What is the elasticity of supply of sugary drinks? Why? c. Is the tax on sugary drinks progressive...

Define the Ricardian Equivalence Theorem. Explain the macroeconomic effects of a tax cut according to the...

Define the Ricardian Equivalence Theorem. Explain the macroeconomic effects of a tax cut according to the Ricardian Equivalence proposition. Include in your answer the IS-LM graph that shows the effects of this tax cut.

4. a) Keynesian theory says that tax cut will boost household consumption. But David Ricardo argued...

4. a) Keynesian theory says that tax cut will boost household consumption. But David Ricardo argued that tax cut may not necessarily increase consumption,i.e. the Ricardian equivalence. What are the rationales behind these two opposite arguments? b) What are the conditions for Ricardian view of tax cut to be valid in the real world? c) For the same dollar amount of tax cut by three different ways; cash payment, non-redeemable consumer voucher and non-redeemable coupon with collateral payment from consumer,...

How could the current personal income tax be modified so that it becomes a consumption tax?...

How could the current personal income tax be modified so that it becomes a consumption tax? In what way can consumption be regarded as a better index of ability to pay taxes than income? Does an income tax penalize the saver while a consumption tax does not?

Suppose the economy is initially in equilibrium. Congress passes a tax cut policy. Compare the impact...

Suppose the economy is initially in equilibrium. Congress passes a tax cut policy. Compare the impact of this policy in a small open economy and a large open economy. In a small open economy, how does this policy affect national saving, the real interest rate, trade balance, and the real exchange rate? Use diagrams to help answer this question. In a large open economy, how does this policy affect national saving, the real interest rate, trade balance, and the real...

Question