Author Question: A U.S. presidential candidate promises to redistribute income and encourage economic growth. Why ... (Read 122 times)

Engineer · **on:** Jun 30, 2018

A U.S. presidential candidate promises to redistribute income and encourage economic growth. Why might these goals be in conflict?
a. The poor, on average, save more than the rich. Taxing the incomes of the rich to transfer to the poor will result in an increase in total savings.
b. Taxing the incomes of the rich to transfer to the poor will result in the rich saving more.
c. Taxing the incomes of the rich to transfer to the poor will provide disincentives for work and capital accumulation.
d. Taxing the incomes of the rich to transfer to the poor will provide incentives for the rich to work more to make up for income lost to taxes.

Question 2

Options are less than perfect as instruments to induce better performance because:
a. they are most often backdated.
b. they are independent of market volatility.
c. more than 90 percent of options expire worthless.
d. executives often take risky decisions to raise the value of their options.