Explain why a proportional tax on wages is distortionary, making individuals worse off than raising the equivalent tax revenue from a lump sum tax.
- ‘Lower wages incentivise the poor to work more hours, whereas higher wages incentivise the rich to work more hours.’ Analyse this assertion.
- Explain why a proportional tax on wages is distortionary, making individuals worse off than raising the equivalent tax revenue from a lump sum tax.
- How worried should we be about the rise in the ratio of government debt to GDP? Are we imposing too high a tax burden on future generations?
- Define the policy of quantitative easing. Is this a policy that is consistent with the underlying assumptions behind the Real Business Cycle model, the Keynesian Coordination Failure Model or the Small Open Economy model? Why or why not?
- The UK current account surplus during 2019 was -3.1% of GDP, during the first quarter of 2020 was -3.4% and averaged -2.7% during the second and third quarters of 2020. Considering the large negative impact of the pandemic in the UK economy what would the Small Open Economy model predict and why? What do you think best explains the pattern we observe?
