Refer to the News Wire to answer three questions. NEWS WIRE: FISCAL STIMULUS: TAX CUTS Trump Tax Cuts Boost Spending The Tax Cuts and Jobs Act of 2017 seems to be working. Although the lion's share of President Trump's tax cuts went to business, consumers got a tax break as well. For the average U.S. household, the tax cut amounts to roughly $40 a week in take-home pay. That may not sound like much, but with 130 million households, that extra income can pack some punch. According to the National Retail Federation, consumer spending was up 4.8 percent in the first six months of this year. And the government reports that GDP grew by 4.2 percent in the second quarter, the best performance since 2014. There may be other factors at work here, but tax-cut fueled consumer spending is certainly a big contributor.
Refer to the News Wire to answer three questions. NEWS WIRE: FISCAL STIMULUS: TAX CUTS Trump Tax Cuts Boost Spending The Tax Cuts and Jobs Act of 2017 seems to be working. Although the lion's share of President Trump's tax cuts went to business, consumers got a tax break as well. For the average U.S. household, the tax cut amounts to roughly $40 a week in take-home pay. That may not sound like much, but with 130 million households, that extra income can pack some punch. According to the National Retail Federation, consumer spending was up 4.8 percent in the first six months of this year. And the government reports that GDP grew by 4.2 percent in the second quarter, the best performance since 2014. There may be other factors at work here, but tax-cut fueled consumer spending is certainly a big contributor.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Refer to the News Wire to answer three questions.
| NEWS WIRE: FISCAL STIMULUS: TAX CUTS |
| Trump Tax Cuts Boost Spending |
| The Tax Cuts and Jobs Act of 2017 seems to be working. Although the lion's share of President Trump's tax cuts went to business, consumers got a tax break as well. For the average U.S. household, the tax cut amounts to roughly $40 a week in take-home pay. That may not sound like much, but with 130 million households, that extra income can pack some punch. According to the National Retail Federation, consumer spending was up 4.8 percent in the first six months of this year. And the government reports that |
| Source: News accounts of September–October 2018. |
Instructions: In part a, enter your response as a whole number. In parts b and c, round your responses to one decimal place.
- How much did the weekly disposable income of the average household increase as a result of the Trump tax cut?
$ ____ per week
- How much did the weekly disposable income of all households increase?
$ ____ billion per week
- If the MPC was 0.55, by how much did total consumer spending increase
i. after a one-week boost to incomes?
$ ____ billion
ii. after all the spending cycles were completed after a one-week boost to incomes?
$ _____ billion
Expert Solution
Step 1
Disposable income is the money you have cast aside from your income after you pay taxes. It's computed using the following formula: disposable income = personal (income - current taxes).
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