Principles of Microeconomics
7th Edition
ISBN: 9781305156050
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 20, Problem 5CQQ
To determine
The negative income tax.
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WHAT ARE SOME POLICIES THAT A GOVERNMENT CAN IMPLEMENT TO REDUCE INCOME INEQUALITY? SELECT ALL THAT APPLY
A.
Increase spending in education.
B.
Lower tax for the top quintile.
C.
Stregnthen anti-discrimination laws based on race, gender, sexual orientation, marital status, religion, and disability status.
D.
Increase access to affordable healthcare to all.
E.
Encourage corporate stock ownership.
e. Government policies that lead to underproduction, such as quotas, are in violation of the first fundamental theorem of welfare economics. Do you agree? Why/why not?
f. What is the difference between the marginal excess tax burden and the marginal cost of public funds when considering a policy?
One tradeoff society faces is between efficiency and equity. Define each term. If Oman government redistributes income from the rich to the poor, explain how this action affects equity as well as efficiency in the economy.
Chapter 20 Solutions
Principles of Microeconomics
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Similar questions
- Describe how each of these changes is likely to affect poverty and inequality: Incomes rise for low-income and high-income workers, but rise more for the high-income earners. Incomes fall for low-income and high-income workers, but fall more for high-income earners.arrow_forwardIf Oman government redistributes income from the rich to the poor, explain how this action affects equity as well as efficiency in the economyarrow_forwarda) Why do you think we should use taxation as a redistribution tool in a country? b) Discuss whether kind payments and cash payments is better regarding indivual’s utility when helping the poor?arrow_forward
- How does the government make an equitable/impartial/fair distribution of income? Give an example and explain why.arrow_forwardEquity is A. the fair distribution of economic benefits. B. always achieved by the market. C. when poorer people's income is growing more rapidly than more wealthy people's income. D. an exactly equal distribution of income.arrow_forward1. An economy's Lorenz Curve reveals that an economy's highest income quintile has 65% of the economy's income while the lowest income quintile only has 5% of the economy's income. Solely based on the Lorenz Curve, is this distribution of income fair? Why or why not? 2. To combat income inequality and to generate increased tax revenues to fund expenditures, government officials decide to aggressively increase how progressive income taxes are, so much so that the top income earners are marginally taxed 90% of their income (and while this marginal tax rate may seem oppressive, these top income earners still have more than enough income to satisfy all of their needs and all but the most extravagant of wants - basically, these earners have more than enough money). Argue why this tax policy is a fair approach to fund government expenditures. Why might this tax policy fail to achieve its objectives (tax revenues would actually decline as a result)?arrow_forward
- In order to measure income inequality, economists look at how income is distributed in ... Group of answer choices a. quintiles b. degrees c. five percent brackets d. ten percent bracketsarrow_forwardCities and towns mainly rely for revenue on a. excise taxes. b. income taxes. c. payroll taxes. d. property taxes. Official data may overstate the extent of poverty because a. it overstates the taxes paid by the poor. b. it overestimates the amount the poor earn in the “underground economy.” c. it does not add “in-kind” transfers to the incomes of the poor. d. poverty is a relative concept as opposed to an absolute concept.arrow_forwardWe have discovered that the welfare system discourages recipients from working because the more income they earn, the less welfare benefits they receive. How does the earned income tax credit attempt to loosen the poverty trap?arrow_forward
- A group 0f 10 people have the following annual incomes: 24,000,18,000,50,000,100,000,12,000,36,000,80,000,10,000,24,000,16,000. Calculate the share of total income that each quintile receives from this income distribution. Do the top and bottom quintiles in this distribution have a greater or larger share of total income than the top and bottom quintiles of the U.S. income distribution?arrow_forwardTo reduce income inequality, should the marginal tax rates on the top 1 be increased?arrow_forward
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