Problem 1:
British Prime Minister Lady Thatcher proposed a poll tax that levied an equal amount of tax on each citizen regardless of his or her income. This tax was repealed after a brief trial period. Why do you think this tax was unpopular? Discuss the pros and cons of the tax and arrive at a conclusive answer.
Problem 2:
One strategy of long-term growth is to provide personal tax incentives for households to increase their personal savings. Explain the rationale for this policy. Also analyze the effect this policy might have in the short run on the following macroeconomic variables:
- Economic growth
- Interest rate
- Investment demand
- Government deficit