Question

Can you please state true false or uncertain and explain the reasoning in 4 or more sentences

4)If the amount of tax paid by an individual with income level Y is equal to T(Y) = X + 0.3Y, then if X = 0 the tax is proportional, while if X < 0 the tax is progressive.

5)The direct and excess burdens from an excise tax are greater the less elastic is demand in the market. [Hint: Assume perfectly elastic supply.]

6) The measured unemployment rate can only decrease if some of those unemployed get jobs and become counted as employed.

Answer 1

4) Answer: False

Proportional tax is the tax rate which is same for all income groups

Progressive tax is the tax rate which increases if the income increase.

In the above case if X = 0 than it is a proportional tax but if the X <0 we cannot say whether the tax is progressive or not as we don't know exact value of X. So the statement is false

5) Answer: True

At a perfect elastic supply and less elasticity of demand the consumer will have to bear the burden of taxes . So the less elasticity the demand the greater the burden of taxes.

6) Answer: True

Unemployment rate = Total number of unemployed people/ Total labour force

Unemployment rate decrease when the number of people who are unemployed get a job and are considered as employed. As those who are employed will not be considered as unemployed thus the number of unemployed people decrease leading to decrease in unemployment rate.