Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Question
Chapter 20, Problem 7SPPA
To determine
Distribution of income after taxes and benefits.
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The table shows the distribution of market income.
Suppose that the government redistributes income by
taxing the 60 percent of households with the highest
market incomes 10 percent, then distributing the tax
collected as an equal benefit to the 40 percent with the
lowest market income.
If the people whose market incomes are taxed cut their
work hours and their market incomes fall by 10 percent,
what is the distribution of income after taxes and benefits?
Complete the table to show the new distribution of
income. (Ignore any cost of administrating the
redistribution scheme.)
>>> Answer to 1 decimal place.
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Households
Lowest 20 percent
Second 20 percent
Third 20 percent
Fourth 20 percent
Highest 20 percent
Market
income
(millions
of dollars)
5
9
20
30
36
Income after
tax and benef
(percentage of tc
income after ta
and benefits)
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Hi pro expert Hand written solution is not allowed.
Suppose the tax rate on the first $10,000 income is 0; 10 percent on the next $20,000; 20 percent on the next $20,000; 30 percent on the next $30,000; and 40 percent on any income over $80,000. Family A has income of $40,000 and Family B has income of $100,000. What is the marginal and average tax rate for each family?
Family A: marginal20 percent; average10 percent; Family B: marginal40 percent; average23 percent.Family A: marginal20 percent; average20 percent; Family B: marginal40 percent; average40 percent.Family A: marginal20 percent; average15 percent; Family B: marginal40 percent; average20 percent.Family A: marginal10 percent; average10 percent; Family B: marginal30 percent; average30 percent.
Chapter 20 Solutions
Foundations of Economics (8th Edition)
Ch. 20 - Prob. 1SPPACh. 20 - Prob. 2SPPACh. 20 - Prob. 3SPPACh. 20 - Prob. 4SPPACh. 20 - Prob. 5SPPACh. 20 - Prob. 6SPPACh. 20 - Prob. 7SPPACh. 20 - Prob. 8SPPACh. 20 - Prob. 9SPPACh. 20 - Prob. 1IAPA
Ch. 20 - Prob. 2IAPACh. 20 - Prob. 3IAPACh. 20 - Prob. 4IAPACh. 20 - Prob. 5IAPACh. 20 - Prob. 6IAPACh. 20 - Prob. 7IAPACh. 20 - Prob. 8IAPACh. 20 - Prob. 9IAPACh. 20 - Prob. 10IAPACh. 20 - Prob. 11IAPACh. 20 - Prob. 1MCQCh. 20 - Prob. 2MCQCh. 20 - Prob. 3MCQCh. 20 - Prob. 4MCQCh. 20 - Prob. 5MCQCh. 20 - Prob. 6MCQCh. 20 - Prob. 7MCQ
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- Explain how you would create a government program that would give an incentive for labor to increase hours and keep labor from falling into the poverty trap.arrow_forwardTo reduce income inequality, should the marginal tax rates on the top 1 be increased?arrow_forwardHow can the effect of the poverty trap be reduced?arrow_forward
- What is the difference between a progressive tax, a proportional tax, and a regressive tax?arrow_forwardMatch the term with the definition:[?] is the rate you pay on the last dollars you earned A. Average tax rate[?] is the overall rate you pay on your entire income B. Marginal tax ratearrow_forwardCompare one poor person with an income of $10,000 per year with a relatively wealthy person who has an income of $60,000 per year. Imagine that the person drinks 15 bottles of wine per year at a price of $10 per bottle while the wealthy person drinks 50 bottles of wine per year at an average price of $20 per bottle. If a tax of $1 per bottle is imposed on wine, who pays more on taxes? Who pays the greater amount as a percentage of income? If a tax equal to 10% of the wine is imposed, who pays more in taxes? Who pays more as a greater percentage of income?arrow_forward
- "Examine the economic impact of a country implementing a universal basic income (UBI). Discuss how a UBI could affect consumer spending, labor market participation, and income inequality. Consider the potential funding sources for a UBI and the effects on government budgets and taxation."arrow_forwardThe following table shows tax payments made for various incomes. According to the information in the table below, the tax system is: Table 3.1 Taxable income $1,000 $2,000 $4,000 $8,000 Тах рayments $10 $30 $90 $270 a. regressive between $1,000 and $2,000 of income but progressive above $2,000. b. progressive throughout all levels of income. c. regressive throughout all levels of income. O d. progressive between $1,000 and $2,000 of income but regressive above $2,000. O e. proportional throughout all levels of income.arrow_forwardE2arrow_forward
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