According to the standard textbook Keynesian analysis, which is greater: the tax multiplier or the government spending multiplier? Explain the reasoning behind this relationship
The standard textbook Keynesian analysis asserts that the government spending multiplier is larger than the tax multiplier. The reasoning is that when government spends $1, the entire $1 enters the spending stream. However, when government cuts taxes by $1, individuals spend a portion of the dollar and they save a portion of it. Therefore, a $1 tax cut will lead to less than a $1 increase in the spending stream.
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According to the ability-to-pay principle of taxation
A) people in the same economic situation should bear an equal share of the tax burden. B) individuals who are willing to bear a greater share of the tax burden should be compensated with non-monetary benefits. C) it is fair to expect a greater share of the tax burden to be borne by people who have a greater ability to pay. D) individuals who receive the benefit of a good or service should bear a greater share of the tax burden.
The conversion of resources into consumer goods or services is called
A) human capital. B) production. C) opportunity cost. D) absolute advantage.