If You Were Building a Macroeconomic Model That Explores the Effect

question 48

Multiple Choice

If you were building a macroeconomic model that explores the effect of an increase in income tax rates on the size of the labour force,the exogenous variable(s) would be

• A) income tax rates.
• B) the size of the labour force.
• C) both income tax rates and the size of the labour force.
• D) neither income tax rates nor the size of the labour force.

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Definitions:

Kemp-Roth Tax Cut

A significant federal tax reduction in the United States passed in 1981 aimed at stimulating economic growth through lower individual income tax rates.

Corporate Income Tax

Taxes levied on the profits earned by corporations, which vary by country and influence companies' financial strategies.

Excise Taxes

Taxes levied on the sale of specific goods and services, such as gasoline, cigarettes, and alcohol.

Fiscal Year

A fiscal year is a one-year period that companies and governments use for accounting purposes and preparing financial statements, which does not necessarily align with the calendar year.