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Chapter 27: Problem 6

The federal government collected less in total individual income taxes in 1983 than in \(1982 .\) Can we conclude that Congress and the president cut individual income tax rates in 1983 ? Briefly explain.

Short Answer

Expert verified
No, you cannot conclude that Congress and the president cut individual income tax rates in 1983 just because the federal government collected less in total individual income taxes that year. A decrease in the total income tax collected could be due to other factors.

Step by step solution

01

Understanding the Income Tax Collection

Income tax collection by the federal government can be affected by not only the income tax rates but also by changes in the income levels, population size, or the unemployment rate of the country. So, a decrease in total individual income taxes could be due to a lowering of individual income tax rates or it could also be due to a decrease in overall income levels.
02

Analyzing the Given Information

The exercise only provides information that the federal government collected less in total individual income taxes in 1983 than in 1982. It does not provide any information about a specific change in income tax rates, or changes in tax laws.
03

Formulating a Conclusion

Given the information provided, it's not definite to conclude that Congress and the president cut individual income tax rates in 1983. A decrease in the total income tax collected could also be due to a variety of other factors, such as a decrease in total income due to a recession or an increase in unemployment.

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Most popular questions from this chapter

Some economists argue that because increases in government spending crowd out private spending, increased government spending will reduce the long-run growth rate of real GDP. a. Is this outcome most likely to occur if the private spending being crowded out is consumption spending, investment spending, or net exports? Briefly explain. b. In terms of its effect on the long-run growth rate of real GDP, would it matter if the additional government spending involves (i) increased spending on highways and bridges or (ii) increased spending on national parks? Briefly explain.

(Related to Solved Problem 27.6 on page 971 ) A 2015 article in the Wall Street Journal noted that an official of the European Union was forecasting that "Greece faces two years of recession amid sharp budget cuts." What typically happens to a government's budget deficit during a recession? Do governments typically respond with budget cuts as the Greek government did? Briefly explain.

(Related to the Apply the Concept on page 961) Why would a recession accompanied by a financial crisis be more severe than a recession that did not involve a financial crisis? Were the large budget deficits in 2009 and 2010 primarily the result of the stimulus package of \(2009 ?\) Briefly explain.

What are the key differences between how we illustrate a contractionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

As indicated in the chapter, the CBO forecast that real GDP would grow at an average annual rate of 1.9 percent from 2017 to 2027 . The Trump administration pledged to raise the growth rate to 3 percent, although some policymakers and economists were skeptical that this goal could be achieved. Yet from 1960 to \(1969,\) real GDP grew at an average annual rate of 4.5 percent. Briefly discuss the factors that make growth rates that high more difficult to achieve today.
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