Raising taxes too high can result in a slowdown of economic activity.TrueFalse

Lower taxes create a multiplier effect in the economy. It leads to:Group of answer choicesincreases in aggregate demand.subsidies.decreases in prices.technological advances.

Tax increases on business income slow down the rate of increase in aggregate demand by decreasing __________.

Explain the reasons why governments impose taxes and considerwhether an increase in income tax is fairer than an increase in salestaxes.

When taxation becomes excessive, many firms ______________. Additionally excessively taxed firms ______________. Moreover, a wealth tax (a tax on (already taxed) assets rather than on new income) requires _____________. It’s politicians without an economic background pursing these policies virtually ignoring ______________ and focusing solely on spending.Happily pay it with little or no resistance; often make more money (according to noted economist Paul Krugman); no effort since all wealth is sitting in actual paper money in Cayman Island bank accounts; the wealth that miraculously just falls from the sky.Use illegal means to avoid tax; hire more people; donations from workers; wealth creation.Respond in ways (misallocating resources, tax avoidance strategies) that creates more wealth overall; hold more resources for future expansion and wealth creation; the purchase for cash of income earning assets such as machinery or farmland; wealth use.Respond in ways (misallocating resources, tax avoidance strategies) that creates less wealth overall; hold fewer resources for future expansion and wealth creation; the sale for cash of income earning assets such as machinery or farmland; wealth creation

“The government should reduce income taxes” – this statement is an example of positive economics.Question 28Select one:TrueFalse