Question
In: Economics
To reduce the budget deficit, the government creates new unit taxes that generate $3 billion in...
To reduce the budget deficit, the government creates new unit taxes that generate $3 billion in revenue. How will this affect total surplus (i.e., consumer surplus + producer surplus)? a. Total surplus will be unaffected b. Total surplus will fall by less than $3 billion c. Total surplus will fall by $3 billion d. Total surplus will fall by more than $3 billion
Solutions
Expert Solution
"D"
Total surplus in the market will fall by more than $3 billion. To generate $3 billion in the market the tax wedge will cause a dead weight loss in the market of more than $3 billion , that will reduce the total surplus by more than 3 billion.
Rahul Sunny answered 2 years agoRelated Solutions
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Suppose, the government of Australia incurs a budget deficit of $50 billion due to increased government...
Suppose, the government of Australia incurs a budget deficit of
$50 billion due to increased government spending in 2020 as result
of Covid 19. Because of this, the government borrowing in 2021
increases by the same amount.
a) Show this development using a graph representing the market
for loanable funds for Australia . Explain in writing the effect of
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Answer Graph
Effect on interest rate (1 mark)
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Suppose, the government of Australia incurs a budget deficit of $50 billion due to increased government...
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Graph
Effect on interest rate (1
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If the U.S. government runs a budget deficit that will reduce interest rates? True False
If the U.S. government runs a budget deficit that will reduce
interest rates?
True
False
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Answer:
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If a government has a budget deficit, it must Group of answer choices: decrease taxes. decrease...
If a government has a budget deficit, it
must
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decrease its expenditures.
increase taxes.
borrow in the loanable funds market.
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When the government runs a budget deficit,
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balanced.b. investment is lower than it would be if the budget were
balanced.c. interest rates are lower than they would be if the budget were
balanced.d. All of the above are correct.e. None of the above is correct.
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