Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 32, Problem 7SPPA
To determine
To find:
The size of tax wedge on wages, and the true tax rate on the interest income.
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There are two individuals in a society. The federal income tax in this society is such that that the first $20,000 of income is taxed at 10% and income above that is taxed at 30%. The federal government allows taxes paid to local governments to be deducted. James earns a gross income of $40,000, and Jane earns a gross income of $65,000. Out of his income, James pays $1,000 in local taxes; out of her income, Jane pays $20,000 in local taxes. Which of the following statements is true?
A.The federal tax system is progressive.
B.James’ total (local + federal) tax bill is greater than Jane’s total tax bill.
C.The federal tax system is proportional.
D.The federal tax system is regressive
There are two individuals in a society. The federal income tax in this society is such that that the first $20,000 of income is taxed at 10% and income above that is taxed at 30%. The federal government allows taxes paid to local governments to be deducted. James earns a gross income of $40,000, and Jane earns a gross income of $65,000. Out of his income, James pays $1,000 in local taxes; out of her income, Jane pays $20,000 in local taxes. Which of the following statements is true?
a. The federal tax system is proportional.
b. James’ total (local + federal) tax bill is greater than Jane’s total tax bill.
c. The federal tax system is regressive
d. The federal tax system is progressive.
The government is considering raising the tax rate on labor income and asks you to
report on the supply-side effects of such an action.
Use appropriate graphs and report directions of change, not exact magnitudes. What
will happen to:
i.
The supply of labor
ii.
The demand for labor and why?
Equilibrium employment and why?
iii.
iv.
V.
vi.
The equilibrium before-tax wage rate and why?
The equilibrium after-tax wage and why?
Potential GDP?
Chapter 32 Solutions
Foundations of Economics (8th Edition)
Ch. 32 - Prob. 1SPPACh. 32 - Prob. 2SPPACh. 32 - Prob. 3SPPACh. 32 - Prob. 4SPPACh. 32 - Prob. 5SPPACh. 32 - Prob. 6SPPACh. 32 - Prob. 7SPPACh. 32 - Prob. 8SPPACh. 32 - Prob. 9SPPACh. 32 - Prob. 10SPPA
Ch. 32 - Prob. 1IAPACh. 32 - Prob. 2IAPACh. 32 - Prob. 3IAPACh. 32 - Prob. 4IAPACh. 32 - Prob. 5IAPACh. 32 - Prob. 6IAPACh. 32 - Prob. 7IAPACh. 32 - Prob. 8IAPACh. 32 - Prob. 9IAPACh. 32 - Prob. 10IAPACh. 32 - Prob. 11IAPACh. 32 - Prob. 1MCQCh. 32 - Prob. 2MCQCh. 32 - Prob. 3MCQCh. 32 - Prob. 4MCQCh. 32 - Prob. 5MCQCh. 32 - Prob. 6MCQCh. 32 - Prob. 7MCQCh. 32 - Prob. 8MCQ
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- There are two individuals in a society. The federal income tax in this society is such that that the first $20,000 of income is taxed at 10% and income above that is taxed at 30%. The federal government allows taxes paid to local governments to be deducted. Peter earns a gross income of $53,000, and Sandy earns a gross income of $65,000. Out of his income, Peter pays $3,000 in local taxes; out of her income, Sandy pays $5,000 in local taxes. Which of the following statements is true? a. Peter’s total (local + federal) tax bill is greater than Sandy’s total tax bill. b. The federal tax system is progressive. c. The federal tax system is proportional. d. The federal tax system is regressivearrow_forwardThe FICA (Federal Insurance Contribution Act) income cap is the point at which one’s income is no longer subject to the 6.2% social security tax that persons pay on their earnings. Under the current law, only the first $142,800 of earnings is taxed. After that, high earners no longer pay Social Security tax for the entire year. Presently the Nation's total personal income approaches $14 trillion. The Congressional Budget Office reports that 80% of all income earned in the Nation is earned above $142,800. 8A. What is meant by the term “Scrap the Cap.” 8B. If the Cap was “scrapped” and if 12.4 % of the income earned over $142,800 was taxed to fund Social Security, how much additional revenue would be generated annually for social security? 8C. Is Social Security really going bankrupt? Please do fast ASAP... fastarrow_forwardWhich of the following is an effect of deflation on debt? a) Debt becomes easier to repay b) Debt becomes more burdensome c) Debt levels remain unchanged d) Debt becomes irrelevantarrow_forward
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