How does an increase in the proportional labor income tax modify the consumer's budget constraint?
A) a parallel move up
B) a parallel move down
C) the slope decreases (constraint gets steeper)
D) the slope increases (constraint gets flatter)
D
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Whenever a buyer and a seller agree to trade, both must believe they will be made better off
A) whether the buyer and seller live in the same city or different countries. B) only if the buyer and seller live in countries with market economies. C) unless one party is richer than the other. D) unless the buyer resides in a different country than the seller. International trade may make the buyer or seller worse off.
The situation in which short-term interest rates are pushed to zero, leaving the central bank unable to lower them further is known as
A) an interest rate panic. B) the Taylor rule. C) a zero-sum game. D) a liquidity trap.