EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 18, Problem 5DQ
To determine
The most important source of revenue and expenditure for the state and local governments.
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Students have asked these similar questions
Suppose George made $20,000 last year and that he lives in the country of Harmony. The way Harmony levies income taxes, all
citizens must pay 10 percent in taxes on their first $10,000 in earnings and then 50 percent in taxes on anything else they might earn.
Given that George earned $20,000 last year, his marginal tax rate on the last dollar he earns will be
rate for his entire income will be
and his average tax
O 10 percent; 50 percent
O 50 percent; less than 50 percent
O 10 percent; less than 50 percent
O 50 percent; 50 percent
Economics
Below is a tax table. Assume I earn $150 a year. My tax bracket is
my marginal tax rate is
I pay in taxes.
my average tax rate is
; and
O to $100 is 10%
$101 to $200 is 15%
$201 to $300 is 20%
O 10%; 15%; 13.5%; $17.50
O 15%; 15%; 11.7%; $17.50
O none of these
O 15%; 15%; 12.5%; $13.50
In the United States, from the most recent fiscal data we reviewed in class, total government spending is roughly 39% of
GDP; yet, using the expenditure method for calculating GDP, government expenditures on goods and services were only
17% of GDP. Which of the following most likely explains the difference?
Select one:
O a. Transfer payments are included in the second figure, but not the first one.
O b. Transfer payments are included in the first figure, but not the second one.
O c. Military (i.e. defense) spending on goods and services is included in the second figure, but not the first one.
O d. Military (i.e. defense) spending on goods and services is included in the first figure, but not the second one.
Chapter 18 Solutions
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- If the tax code exempts the first $20,000 of income from taxation and then taxes 25 percent of all income above that level, then a person who earns percent and a marginal tax rate of $50,000 has an average tax rate of percent. O 15, 25 O 25, 15 O 25, 30 O 30, 25arrow_forwardSuppose George made $20,000 last year and that he lives in the country of Harmony. The way Harmony levies income taxes, each citizen must pay 10 percent in taxes on their first $10,000 in earnings and then 50 percent in taxes on anything else they might earn. So given that George earned $20,000 last year, his marginal tax rate on the last dollar he earns will be __________ and his average tax rate for his entire income will be _________________. a. 50 percent; 50 percent. b. 50 percent; less than 50 percent. c. 10 percent; 50 percent. d. 10 percent; less than 50 percent.arrow_forward5. LO 4 Suppose, as in the federal income tax code for the United States, that the representative con- sumer faces a wage income tax with a standard deduction. That is, the representative consumer pays no tax on wage income for the first x units of real wage income, and then pays a proportional taxt on each unit of real wage income greater than x Therefore, the consumer's budget constraint given by C wh -D + if wh- D=x., or C (1-wh-D+ tx+ if_wCh = D2 Now, suppose that the government reduces tax deduction x Using diagrams, determine the effects of this tax change on the consumer, and explain your results in terms of income and sub stitution effects. Make sure that you consider two cases. In the first case, the consumer does not pay any tax before x is reduced, and in the second case, the consumer pays a positive tax before x is reducedarrow_forward
- Which of the following changes in personal income tax would lead to the smallest increase in consumption? O a. O b. a $15 000 decrease in taxes, if MPC equals 0.6 O c. a $30 000 decrease in taxes, if MPC equals 0.25 Oe. a $20 000 decrease in taxes, if MPC equals 0.5 O d. a $12 000 decrease in taxes, if MPC equals 0.75 a $10 000 decrease in taxes, if MPC equals 0.2arrow_forwardThe ratio of all levels of government spending to GDP in the United States is about percent. 40 50 O 70 O 10 - 20arrow_forwardQuestion 8 Year 1 2 3 4 5 Government Government tax revenues expenditures (billions of dollars) 240 250 260 300 325 O 50 What is the amount of the surplus or deficit incurred in year 5 by the government shown in the above table?. O $15 billion deficit O $15 billion surplus (billions of dollars) 240 245 255 320 340 O $5 billion surplusarrow_forward
- Suppose that the for every 10% increase in the price of gasoline, consumers will decrease the quantity demanded by 1%, and suppliers will increase their supply of gasoline by 9%. Next, suppose that there is a $0.50 per gallon tax on gasoline, and after the tax quantity exchanged in the market is 15 billion gallons of gasoline. Given this information, what is the total government revenue from the tax? What is the consumer and producer tax incidence (how much of the tax revenue would have come from consumers, and how much from suppliers)? Search entries or author Reply. Unread ↓ 5 5 Replies are only visible to those who have posted at least one reply.arrow_forwardThe figure shows government expenditure and revenue as a percentage of GDP, 1990-2019. During which of the following periods did the federal government run a budget surplus? 27.0% 25.0% -Expenditures 23.0% 21.0% 19.0% Receipts 17.0% 15.0% YEAR O 1998-2001 None of these answers is correct. O 2003-2008 2012-2018 PERCENT OF GDP 0661 1991 1993 1994 9661 2661 6661 0007 2002 2003 2005 9007 2008 6007 2011 2012 2014 2015 2017 2018arrow_forwardSuppose that the U.S. government decides to charge cola producers a tax. Before the tax, 30 billion cases of cola were sold every year at a price of $4 per case. After the tax, 23 billion cases of cola are sold every year; consumers pay $5 per case, and producers receive $2 per case (after paying the tax). The amount of the tax on a case of cola is $_________ per case. Of this amount, the burden that falls on consumers is $_________ per case, and the burden that falls on producers is $__________ per case. True or False: The effect of the tax on the quantity sold would have been smaller if the tax had been levied on consumers.arrow_forward
- Suppose the government incurs more debt to finance new military spending. To what extent will this impose a burden on future generations? O a. Government spending on military is considered investment expenditure. O b. Military spending does not at all benefit the future generations. O c. Government spending crowds out private investment spending. O d. Government debt needed to finance military expenditures is held by domestic entities.arrow_forwardQuestion 5: Combined state and federal taxes on gasoline average around 50 cents per gallon, and these taxes are statutorily levied on gasoline sellers. Because the demand for gasoline is relatively inelastic compared to the supply of gasoline: buyers likely do not bear much of the actual burden because it is statutorily levied on sellers who must submit the tax payments. sellers likely bear most of the actual burden of the tax through lower gasoline prices. O the net price received by sellers after they pay taxes likely falls by almost the full amount of the tax. O buyers likely bear most of the actual burden of the tax through higher gasoline prices.arrow_forward4. Suppose that there are two households in the economy, A and B, that they face the same wage rate w, and that the government initially uses a proportional income tax according to which each household must pay a fraction t of its labor income as income tax. Assume that given this tax scheme household A chooses to work full time while household B chooses to work part time. Now suppose that the government is interesting in studying the impact of changing the tax system to a progressive tax system where the household work- ing full time would pay a tax rate th >t while the household working part time would pay a rate ti < t. (a) Draw a graph of the impact of this change on the budget constraint that households face with the two different tax systems. (b) What would such a change in the tax system imply for the optimal choice of the two households?arrow_forward
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