Basic economic questions

  1. (0, 5, or 10) Should income in the U.S. be distributed equally? If not, should there be at least a greater

degree of equality than we presently have? What are the advantages and disadvantages of greater

equality?

  1. (0, 5, or 10) When the capital gains tax rate was reduced from 28 to 20 percent in 1997, and especially

when it was cut again to 15 percent in 2003, many people thought these reductions would be temporary.

How did this belief affect the incentive to sell assets, when the tax rates were cut compared to a situation

in which the tax rates were cut permanently? How would the belief that the cuts were temporary alter the

choice between selling assets that had experienced large capital gains versus those that had experienced

only small capital gains? (Page 83)

  1. (0, 5, or 10) In 1984, balances in individual retirement plans $865 billion. Twenty-five years later, they

rose to almost $13 trillion. In general, balances in private retirement accounts are not included in the

statistics that show rising income or wealth inequality. How might such an oversight affect our conclusions

about inequality?

  1. (0, 5, or 10) Consider a decrease in the capital gains tax rate and an increase in the earned income tax

credit.

a) What is the effect of each of these on income distribution?

b) Would you support either one? Why or why not?

  1. (0, 5 or 10) What changes do you feel are likely to be made to Social Security in the next 5 to 20 years?

Why? Think of the people/organizations affected by the change, and who would support the change and

who would fight it.

  1. (0, 5 or 10) How would a change in the immigration laws that allowed more legal immigration affect the

budget crisis the U.S. faces with Social Security and Medicare?

  1. (0 or 5) On the issues of income inequality and poverty, do you consider yourself an economic liberal

(support government involvement in reducing income inequality and poverty) or an economic conservative

(the government should not be involved)? Where would you place yourself on this scale (pick a number

from 1 to 11)?

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