CONNECT F/MICROECONOMICS
CONNECT F/MICROECONOMICS
21st Edition
ISBN: 2810022151240
Author: McConnell
Publisher: MCG
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Chapter 23, Problem 11DQ
To determine

The social insurance and public assistance programs.

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8 What is meant by the tax subsidy of employer-paid health insurance? Explain why the subsidy very likely increases health care spending and thus the cost of such insurance. Give an example as to why a $5,000 health insurance benefit provides a greater mon- etary benefit to someone in the 33 percent marginal tax bracket than someone in the 15 percent marginal tax bracket.
1. A middle-income worker with a dependent spouse older than the normal retirement age retired in January 2004. In the year prior to retirement, her gross monthly earnings are $1,500. Her Social Security pension benefit is $1,000 per month. Prior to retirement, she was subject to total taxes on her labor earnings amounting to 20 percent. Calculate her gross and net replacement rates. Suppose the cash value of Medicare subsidies that she expects to receive during retirement amount to $2,000 per year. Recalculate the replacement rates, including the Medicare benefits.
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