What is the "tax wedge"?
What will be an ideal response?
The "tax wedge" is the difference between the pretax and posttax return to an economic activity.
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If households save $40 billion less at each level of income and the marginal propensity to consume (MPC) is 0.8, the aggregate expenditure line will _____
a. intersect the 45-degree line at a real GDP of $40 billion b. shift upward by $40 billion c. shift downward by $40 billion d. shift upward by $200 billion because of the multiplier mechanism e. shift downward by $200 billion because of the multiplier mechanism
Applying the concept of labor specialization to international trade, if all countries specialize in producing what they do relatively best,
a. each country could become self-sufficient b. international specialization and exchange will benefit the producers but harm the consumers c. consumers are better off, but producers are worse off d. inefficiency in production occurs because specialization, although allowing for moreproduction, causes people to know less about the "big picture" e. there will be more goods produced, exchanged, and consumed