Question

1- For U.S. workers in tradable sectors such as manufacturing, the effect of globalization has been:

A) to push wages up relative to those in nontradable sectors such as medical doctors and finance professors.

B) to cause greater upward mobility for those workers while reducing downward mobility.

C) to push wages down or leave them unemployed.

D) to reduce unemployment in this group while leaving wage rates about the same.

2- A higher tax rate could result in lower tax revenues if:

A) attempts to avoid or evade taxes increase.

B) individuals switch from leisure to labor.

C) fewer people qualify for government assistance.

D) the tax has no incentive effects.

Answer 1

1. Option C.

• For U.S workers in tradable sector's such as manufacturing, the effect of globalisation has been to push wages down or to leave them unemployed.
• Though globalisation has always lead to intergtation of various marker's, it has lead to a decline in the range of employment opportunities available in tradable sector's such as manufacturing due to the increased production cost and the need to replace low skilled labour with new technologies or highly skilled labour.
• Due to the increasing manufacturing costs or the production costs, the manufacturer's or producer's are either forced to cut down the existing wages or cut down some of the low skilled workers by preserving only highly skilled ones.

2. Option A.

• A main relationship between tax rates and tax revenues shows that when tax rate increases, it results in a lower tax revenues in an economy.
• This mainly occurs when the government tries to avoid or evade taxes which can sevearly damage the economic activity thereby decreasing the revenue received by them through taxes.