________ occurs when households can alter their behavior and do something to legally avoid paying a tax.

A local government currently has a tax base of $4 billion and a tax rate of 5 percent. If the tax rate is increased to 6 percent, the tax base will decrease to $3.5 billion. If the goal is to maximize tax revenues the tax rate should be

A) lowered below 5 percent. B) kept at 5 percent. C) raised to 6 percent. D) abolished.

When economists say that there is a time lag in the effect of monetary policy, what do they mean?

a. That it takes time to observe the effects of fiscal policy on the economy b. That the Fed takes awhile to figure out what it wants to do c. That the Congress takes awhile to figure out what it wants to do d. That it takes time to observe the effects of monetary policy on the economy e. That the public needs time to decide how to respond to monetary policy changes