This topic contains a solution. Click here to go to the answer

Author Question: Suppose an identical tax is levied on capital, labor, and land. Would the tax have the same effect ... (Read 55 times)

WWatsford

  • Hero Member
  • *****
  • Posts: 539
    • Biology Forums!
Suppose an identical tax is levied on capital, labor, and land. Would the tax have the same effect in each of these markets? Explain your answer.
 
  What will be an ideal response?

Question 2

To fight unemployment and close a recessionary gap, the Fed ______.
 
  A. stimulates aggregate demand by lowering the federal funds rate, which increases the quantity of money
  B. stimulates aggregate supply by lowering the federal funds rate, which increases potential GDP
  C. increase employment, which increases real GDP
  D. increases bank reserves, which banks use to make new loans to busi-nesses, which increases aggregate supply



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

manuelcastillo

  • Sr. Member
  • ****
  • Posts: 304
Answer to Question 1

The effect of the tax would depend on the relative elasticities of supply and demand for land, labor, and capital. A tax on land falls mostly on landowners because the supply of land is very inelastic (land does not have an alternative use). Since capital the supply of capital is very elastic, a tax on capital falls largely on demanders. The effect of a tax on labor will depend on whether the supply or demand for labor is more elastic. If the demand for labor is inelastic, firms will bear a higher proportion of the tax. On the other hand, if the supply of labor is inelastic, workers will bear a higher proportion of the tax. The available empirical evidence suggests that the supply of labor is less elastic than demand. As a consequence, economists believe that workers bear most of the burden of a tax on labor.

Answer to Question 2

A By lowering the federal funds rate, the Fed ultimately increases aggregate demand, which increases real GDP and lowers unemployment.




WWatsford

  • Member
  • Posts: 539
Reply 2 on: Jun 29, 2018
Excellent


nguyenhoanhat

  • Member
  • Posts: 332
Reply 3 on: Yesterday
Gracias!

 

Did you know?

Cocaine was isolated in 1860 and first used as a local anesthetic in 1884. Its first clinical use was by Sigmund Freud to wean a patient from morphine addiction. The fictional character Sherlock Holmes was supposed to be addicted to cocaine by injection.

Did you know?

Certain topical medications such as clotrimazole and betamethasone are not approved for use in children younger than 12 years of age. They must be used very cautiously, as directed by a doctor, to treat any child. Children have a much greater response to topical steroid medications.

Did you know?

In inpatient settings, adverse drug events account for an estimated one in three of all hospital adverse events. They affect approximately 2 million hospital stays every year, and prolong hospital stays by between one and five days.

Did you know?

Cutaneous mucormycosis is a rare fungal infection that has been fatal in at least 29% of cases, and in as many as 83% of cases, depending on the patient's health prior to infection. It has occurred often after natural disasters such as tornados, and early treatment is essential.

Did you know?

A strange skin disease referred to as Morgellons has occurred in the southern United States and in California. Symptoms include slowly healing sores, joint pain, persistent fatigue, and a sensation of things crawling through the skin. Another symptom is strange-looking, threadlike extrusions coming out of the skin.

For a complete list of videos, visit our video library