Deck 14: Taxes

Question 1

The term (1 - _w) is the faction of labour income the worker gets to keep.

Answer 1

True

Question 2

An increase in the marginal tax rate on labour income reduces overall market activity, as gauged by GDP.

Answer 2

True

Question 3

The average income tax rate is:

A)income taxes divided by income.
B)the change in income taxes when income changes one dollar.
C)income divide by income taxes.
D)the change in income when income taxes change one dollar.

Answer 3

income taxes divided by income.

Question 4

An increase in the marginal tax on labour income, increases the supply of labour.

Question 5

If the marginal tax rate on income, _w, changes but government purchases don't then the government could have:

A)raised some other lower marginal rate wage tax.
B)used all the increased revenue due to the higher marginal tax rate for real transfers.
C)reduced some income tax deductions.
D)all of the above.

Question 6

The marginal income tax rate is:

A)taxes divided by income.
B)the change in taxes when income changes one dollar.
C)income divide by taxes.
D)the change in income when taxes change one dollar.

Question 7

If the real marginal tax rate, _w, increases in the market clearing model then:

A)the supply of labour decreases.
B)the demand for capital decreases.
C)real output, Y, declines.
D)all of the above.

Question 8

If the marginal tax rate on income, _w, changes but government purchases don't then the government could have:

A)raised some other lower marginal rate wage tax.
B)lowered real transfers.
C)raised some income tax deductions.
D)all of the above.

Question 9

If government purchases are constant, then an increase in the marginal income tax rate, _w, leads to:

A)a positive income effect.
B)a negative income effect.
C)no income effect.
D)a marginal income effect.

Question 10

A decrease in the marginal tax on asset income, reduces investment short run and the capital stock and GDP in the long run.

Question 11

A graduate-rate tax structure is one:

A)whose marginal rate increases as income increases.
B)that has a flat rate.
C)whose average rate equals the marginal rate.
D)whose marginal rate decreases as income increases.

Question 12

One less the marginal tax on wages, (1 - _w) is:

A)the fraction of wage income paid in taxes.
B)the fraction of wage income the worker gets to keep.
C)the fraction of income the government receives.
D)the average marginal tax rate.

Question 13

The after tax real wage is:

A)(w/P)• _w
B)(w/P)•L•(1 - _w)
C)(w/P)•(1 - _w)
D)(w/P)/(1 - _w)

Question 14

The Eurozone governments gain revenue from:

A)individual income taxes.
B)social insurance taxes.
C)excise taxes.
D)all of the above.

Question 15

The marginal tax rate is the change in taxes when taxable income changes one unit.

Question 16

A flat-rate tax structure is one:

A)whose marginal rate increases as income increases.
B)that has graduated rates.
C)whose average rate equals the marginal rate.
D)whose marginal rate decreases as income increases.

Question 17

If the marginal tax rate on income, _w, changes but government purchases don't then the government could have:

A)lowered some other lower marginal rate wage tax like the social security payroll tax.
B)reduced real transfers.
C)reduced some income tax deductions.
D)all of the above.

Question 18

The average marginal income tax rate is:

A)the marginal tax rate of the average household.
B)the average tax rate of the marginal household.
C)the change in income taxes divided by income.
D)all of the above.

Question 19

The Eurozone government gains most revenue from:

A)property taxes.
B)social contributions taxes.
C)UN grants.
D)all of the above.

Question 20

If the marginal tax rate on income, _w, changes but government purchases don't then the government could have:

A)lowered some other lower marginal rate wage tax like the social security payroll tax.
B)the increased revenue due to the higher marginal tax rate is all used for real transfers.
C)raised some income tax deductions.
D)all of the above.

Question 21

An increase in government purchases financed by an increase in the marginal tax rate on labour income, decreases the quantity of labour supplied, if the:

A)negative substitution effect is bigger than the positive income effect.
B)negative substitution effect is smaller than the positive income effect.
C)positive substitution effect is bigger than the negative income effect.
D)positive substitution effect is smaller than the negative income effect.

Question 22

The after tax real interest rate is:

A)r/ _r
B)(1+ _r)/(1+r)
C)(1- _r)•r
D) _r/r

Question 23

With an increase in government purchases financed by an increase in the marginal tax rate on labour income, the change in labour supply depends on whether the:

A)negative substitution effect is bigger than the positive income effect.
B)negative substitution effect is bigger than the negative income effect.
C)positive substitution effect is bigger than the negative income effect.
D)positive substitution effect is bigger than the positive income effect.

Question 24

In the short run if the tax rate on asset income, _r , rises, then in the market clearing model:

A)household current consumption will fall compared to future consumption.
B)current investment will fall.
C)the after tax real interest rate rises.
D)all of the above.

Question 25

If the real marginal tax rate, _w, increases in the market clearing model then:

A)the supply of labour increases.
B)the demand for capital increases.
C)real output, Y, declines.
D)all of the above.

Question 26

In the long run an increase in the marginal tax rate on asset income, _r, in the market clearing model:

A)decreases GDP.
B)decrease the capital stock.
C)lowers consumption.
D)all of the above.

Question 27

If there is a decrease in government purchases along with a decrease in the marginal tax rate on labour income, then:

A)the income effect would be toward a decrease in labour supply.
B)the overall effect on labour supply is uncertain.
C)the substitution effect would be towards an increase in labour supply.
D)all of the above.

Question 28

If the real marginal tax rate, _w, increases in the market clearing model then:

A)the supply of labour increases.
B)the demand for capital decreases.
C)real output, Y, rises.
D)all of the above.

Question 29

In the long run an increase in the marginal tax rate on asset income, _r, in the market clearing model:

A)decreases GDP.
B)increase the capital stock.
C)raises consumption.
D)all of the above.

Question 30

In the short run if the tax rate on asset income, _r , rises, then in the market clearing model:

A)household current consumption will rise compared to future consumption.
B)current investment will fall.
C)the after tax real interest rate falls.
D)all of the above.

Question 31

If there is a decrease in government purchases along with a decrease in the marginal tax rate on labour income, then:

A)the income effect would be toward a decrease in labour supply.
B)the overall effect on labour supply is negative.
C)the substitution effect would be towards a decrease in labour supply.
D)all of the above.

Question 32

In the long run an increase in the marginal tax rate on asset income, _r, in the market clearing model:

A)increases the stock of capital and real GDP.
B)increases the stock of capital and decreases real GDP.
C)decreases the stock of capital and real GDP.
D)decreases the stock of capital and increases real GDP.

Question 33

If there is a decrease in government purchases along with a decrease in the marginal tax rate on labour income, then:

A)the income effect would be toward an increase in labour supply.
B)the overall effect on labour supply is uncertain.
C)the substitution effect would be towards a decrease in labour supply.
D)all of the above.

Question 34

In the long run an increase in the marginal tax rate on asset income, _r, in the market clearing model:

A)increases GDP.
B)decrease the capital stock.
C)raises consumption.
D)all of the above.

Question 35

If there is a decrease in government purchases along with a decrease in the marginal tax rate on labour income, then:

A)the income effect would be toward an increase in labour supply.
B)the overall effect on labour supply is positive.
C)the substitution effect would be towards an increase in labour supply.
D)all of the above.

Question 36

An increase in government purchases financed by an increase in the marginal tax rate on labour income, increases the quantity of labour supplied, if the:

A)negative substitution effect is bigger than the positive income effect.
B)negative substitution effect is smaller than the positive income effect.
C)positive substitution effect is bigger than the negative income effect.
D)positive substitution effect is smaller than the negative income effect.

Question 37

If transfer payments are related to characteristics of households like income, then an increase in the marginal tax on labour income, _w,:

A)will have smaller effects in the market clearing model.
B)will have stronger effects in the market clearing model.
C)will have the same effects in the market clearing model.
D)will have no effects in the market clearing model.

Question 38

If the marginal tax on labour income, _w, rises then the tax receipts of the government:

A)rise.
B)fall.
C)stay the say.
D)may rise, fall or stay the same.

Question 39

If the real marginal tax rate, _w, increases in the market clearing model then:

A)the supply of labour decreases.
B)the demand for capital increases.
C)real output, Y, rises.
D)all of the above.

Question 40

In the short run if the tax rate on asset income, _r , rises, then in the market clearing model:

A)household current consumption will rise compared to future consumption.
B)current investment will rise.
C)the after tax real interest rate rises.
D)all of the above.

Question 41

A decrease in the marginal tax rate on asset income, _r, in the short run in the market clearing model:

A)raises change the stock of capital
B)increases real GDP.
C)increases gross investment.
D)all of the above.

Question 42

The decreasing part of the Laffer curve supports the view of proponents of:

A)lower tax rates
B)unchanged tax rates.
C)higher tax rates.
D)none of the above.

Question 43

A decrease in the marginal tax rate on asset income, _r, in the short run in the market clearing model:

A)raises the stock of capital
B)does not change real GDP.
C)reduces the market clearing rental price of capital.
D)all of the above.

Question 44

The decreasing part of the Laffer curve supports the view of proponents of:

A)lower public spending
B)unchanged public spending
C)higher public spending
D)none of the above.

Question 45

A decrease in the marginal tax rate on asset income, _r, in the short run in the market clearing model:

A)does not change the stock of capital
B)does not change real GDP.
C)does not change the market clearing rental price of capital.
D)all of the above.

Question 46

The increasing part of the Laffer curve supports the view of proponents of:

A)lower tax rates
B)unchanged tax rates.
C)higher tax rates.
D)none of the above.

Question 47

Under what conditions in the market clearing model will the quantity of labour supplied increase when government purchases are increased and financed by an increase in the marginal tax rate on labour income?

Question 48

The increasing part of the Laffer curve supports the view of proponents of:

A)lower public spending
B)unchanged public spending
C)higher public spending
D)none of the above.

Question 49

What are the short run effects of an increase in the marginal tax rate on assets income in the market clearing model?

Question 50

What are the effects of an increase in the marginal tax rate on labour income in the market clearing model?

Question 51

A decrease in the marginal tax rate on asset income, _r, in the short run in the market clearing model:

A)does not change the stock of capital
B)decreases real GDP.
C)reduces the market clearing rental price of capital.
D)all of the above.

Question 52

What are the long run effects of an increase in the marginal tax rate on asset income in the market clearing model?

Question 53

What does (1 - _w) tell us and what are the real after tax returns on assets and labour if income from them are taxed?

Question 54

A decrease in the marginal tax rate on asset income, _r, in the short run in the market clearing model:

A)raises the stock of capital
B)increases real GDP.
C)does not change the market clearing rental price of capital.
D)all of the above.