Suppose the government reduces marginal income tax rates and increases welfare payments. This policy combination will:
A. increase the incentive to work.
B. have no effect on the incentive to work.
C. have an ambiguous effect on the incentive to work.
D. reduce the incentive to work.
Answer: C
Economics
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If households save $0.40 of each additional dollar of increased income and spend the rest, the expenditure multiplier will be
A) 1.67. B) 2.5. C) 4. D) 6.
Economics
The price of X falls by ten percent, and the quantity demanded of X increases by ten percent. Meanwhile, the quantity demanded of Y increases by ten percent too. We would conclude that
A) demand for X is elastic, and X and Y are substitutes. B) demand for X is elastic, and X and Y are complements. C) demand for X is unit-elastic, and X and Y are complements. D) demand for X is inelastic, and X and Y are unrelated.
Economics