Answered: During the great recession Obama…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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5. During the great recession obama administration had instituted a social security payroll tax break: in 2011-12 employees paid 4.2% of their paycheck to the social security fund. In January 2013 the break expired, and now employees pay 6.2% of their paychecks in social security taxes. a) How would you graphically model such a change using the labor-leisure model? as a change in budget constraint or preferences? Ilustrate. b) What prediction can we make with regards to hours worked as a result? Depending on your answer, which effect will dominate income or substitution, that will affect the hours decision? 6. Income support programs. (only if we discussed the TANF program in class). In 2005 North Carolina Temporary Assistance for Needy Families program, known as Work First, had the following features: Maximum monthly benefit (income guarantee) G, $272; Level of disregard, D, $0; Implicit tax rate 27.5% a. How does the availability of the welfare program affect a familys budget constraint when compared to a constraint without the welfare income? Graph. b. A single mother who is eligible for welfare has 80 hours of weekly of available time, and can obtain a job with an hourly wage equal to the minimum wage of S7.25. What is her maximum monthly income (assume there is 4 weeks in a month)? What is the weekly & monthly break c. even point (the income level beyond which she no longer receives the benefits)? constraint? the level of disregard is equal to s200, how does it affect the budget Break-even point? Graph.

During the great recession Obama administration had instituted a social security payroll tax break: in 2011-12 employees paid 4.2% of their paycheck to the social security fund. In January 2013 the break expired, and now employees pay 6.2% of their paychecks in social security taxes. How would you graphically model such a change using the labor-leisure model?… as a change in budget constraint or preferences? Illustrate. What prediction can we make with regards to hours worked as a result? Depending on your answer, which effect will dominate-income or substitution, that will affect the hours decision? Income support programs, (only if we discussed the TANF program in class). In 2005 North Carolina Temporary Assistance for Needy Families program, known as Work First, had the following features: Maximum monthly benefit (income guarantee), G, $272; Level of disregard. D, $0; Implicit tax rate 27.5%; How does the availability of the welfare program affect a family’s budget constraint when compared to a constraint without the welfare income? Graph. A single mother who is eligible for welfare has 80 hours of weekly of available time, and can obtain a job with an hourly wage equal to the minimum wage of $7.25. What is her maximum monthly income (assume there is 4 weeks in a month)? What is the weekly & monthly breakeven point (the income level beyond which she no longer receives the benefits)? If the level of disregard is introduced, equal to $200, how does it at feet the budget constraint? Break-even point? Graph.Show transcribed image text

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