Question

If the government levies $20 billion in taxes to finance additional spending on military weapons, the net impact on total employment will be

a a substantial increase in employment because the additional spending will create lots of jobs.

b a substantial decrease in employment because the higher taxes will destroy lots of jobs.

c small because the higher taxes will reduce spending in the private sector, which will tend to offset any jobs created by the government spending.

d a substantial expansion in employment, but only if the additional spending leads to an increase in the general level of prices.

Answer 1

Answer: The correct answer is c) small because the higher taxes will reduce spending in the private sector, which will tend to offset any jobs created by the government spending.

Explanation: Taxes are compulsory levies imposed by the government on individuals or institutions.

There is a trade off between taxes imposed and private spending by individuals. An increase in government spending will not greatly impact total employment as it tends to balance the economic activities of both the government and the private individuals in the long run.

Answer 2

The correct option is C

Step-by-step explanation:

A tax is a compulsory financial charge or some other type of levy imposed upon a taxpayer (an individual or legal entity) by a governmental organization in order to fund various public expenditures.

Taxation transfers wealth from households or businesses to the government. This has effects which can both increase and reduce economic growth and economic welfare. So an increase in tax will make private business reduce spending.