Suppose automobile salesmen are required to pay a $1000 tax per car sold
Is it likely that the auto salesmen will bear the entire burden of this tax? Why or why not? Would it matter if the demanders were legally required to pay the tax? Explain in detail your answer.
Assuming the supply curve is not perfectly inelastic; the auto salesmen will be able to shift some of the tax burden onto car buyers through higher prices as a result of the supply curve shifting upward by the amount of the tax. It would not matter if the demanders were legally required to pay the tax. If the demanders were legally required to pay the tax their demand curve would just shift downward by the amount of the tax, leading to lower prices and output. As long as the amount of the tax was the same, it would not matter who was statutorily required to pay the tax.
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Which of the following best describes the impact of fiscal policy during the Great Depression?
a. Despite the large increases in government spending as a share of GDP when the New Deal policies were initiated, the expansionary fiscal policy failed to stimulate demand. b. Fiscal policy was focused on monetary expansion, when it should have focused on maintaining a balanced budget. c. It is difficult to link expansionary fiscal policy with economic recovery because government spending and budget deficits were a relatively small portion of GDP prior to the beginning of World War II. d. There is a direct correlation between increases in government spending as a share of GDP and increases in output and employment.
If an increase in the price of some goods outweighs other prices that remain constant or decrease then there is:
A. Inflation. B. Deflation. C. Stagflation. D. Reflation.