By how much did the disposable income of rich people increase as a result of the 2017 drop in the top marginal tax rate from 39.6 percent to 37 percent? Assume rich people have $2 trillion of gross income in the highest bracket.
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- Suppose that the Federal funds rate rose from 3% to 6% during the year. What would you expect to happen to the rate of growth in real consumption, and in the consumption/income ratio, under the following circumstances? (A) The corporate bond rate rose from 6% to 9%. (B) The corporate bond rate remained unchanged at 6%. (C) The stock market declined 20%. (D) The stock market was unchanged. (E) The unemployment rate rose from 5% to 6%. (F) The unemployment rate was unchanged.Consider a tax cut which affects not only consumer disposable income, but also after-tax earnings from labor supplied to labor markets and from financial assets acquired through saving. In the long run we would expect this tax cut to A decrease the level of real GDP. B decrease the price level. C increase both the price level and the level of real GDP. D decrease the price level and increase the level of real GDP.If a lump-sum income tax of $30 billion is levied and the MPS is .4, the consumption schedule will shift ______? a. downward by 18 billion b. upward by $18 billion c. downward by $30 billion d. downward by $12 billion
- Assume taxes are zero and an economy has a consumption function of C = 0.80 (Yd) + $879.06. How much savings take place if disposable income is equal to 3,258.02? Round your answer to two digits after the decimal and include a negative sign if you find negative savings which is borrowing.Consider a closed economy. The profits of private corporations constitute a fraction ?of national income. These profits are subject to corporate tax and a fraction ? of the net profits is distributed to owners. The remaining profits are invested in theeconomy. To encourage investment, the government proposes to cut the corporation tax. The corporation tax is proportional and so is the regular tax but the rates are notnecessarily the same.Analyse the effects of the government proposal assuming that wages and pricesare flexible. Will there be any ambiguity about the results?Assume in the economy there are only lump-sum tax and that there is no progressive tax rate (i.e. the marginal tax rate is 0, or t=0), disposable income will A) Decreases when net taxes decrease B) Decreases when income decreases C) Increases when saving decreases D) All the above. Answer neatly with proper explanation of the each option
- What is the effect of a government budget surplus on the real interest rate and investment?A government budget surplusO A. lowers, crowds outOB. lowers, increasesOC. raises, increasesOD. raises; crowds outthe real interest rate andinvestment.True or false? Explain why. "The marginal propensity to consume out of transitory income is greater than the marginal propensity to consume out of permanent income."Suppose a closed economy has an aggregate consumption function given by C = 100 + 0.75Yd and generates $3000 output and income in equilibrium. Suppose also that the government spends 300 and imposes a lump-sum tax of 50. What is the level of intended investment? (round your answer to the nearest whole value)
- Assume an economy with 1000 consumers. Each consumer has income in the current period of 50 units and future income of 60 units, and pays a lump-sum tax of 10 in the current period and 20 in the future period. The market real interest rate is 8%. Of the 1000 consumers, 500 consume 60 units in the future, while 500 consume 20 units in the future. Determine each consumer’s current consumption and current saving. Current Consumption: Current Saving: Determine aggregate private saving, aggregate consumption in each period, government spending in the current and future periods, the current-period government deficit, and the quantity of debt issued by the government in the current period. Aggregate Private Saving Aggregate Consumption Government spending: Current Future Current period government deficit Quantity of debtExplain how a progressive income tax system works as an automatic stabilizer in the economy during a recession; that is, explain what happens to income and taxes paid during a recession and how that change in taxes paid affects disposable income and consumption.What would happen in the market for loanable funds if the government were to increase the tax on interest income? A) Real interest rates would rise. B) Real interest rates would be unaffected C) Real interest rates would fall. D) The effect on the real interest rate is uncertain.
