MICROECONOMICS PU 9781260510072
21st Edition
ISBN: 9781260510072
Author: McConnell
Publisher: MCG
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Chapter 20, Problem 6DQ
To determine
The difference in the top two categories of federal employment from the top two categories of local and state employment.
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4. 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?
(Last Word) The combined cost of Social Security and Medicare programs was what percent of U.S. GDP in 2008
(A) 7.6
(B) 12.4
(C) 17.2
(D) 2.9
Approximately how many people are employed in the federal bureaucracy? O 1 million-1.4 million O 1.5 million -1.7 million O2 million-2.4 million O 2.5 million - 3 million
Chapter 20 Solutions
MICROECONOMICS PU 9781260510072
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- 2. For 2021, the wage base limit for Social Security taxes increased to $142,800, meaning that wage/salary income above $142,800 is not taxed for Social Security. That means up to $8,853 can be withheld from your paycheck for Social Security taxes for the year, but not more, regardless of how much you earn. The payroll tax for the Social Security program is 12.4%. One reform idea is to remove the wage base limit so all wage/salary income is subject to the 12.4% payroll tax for Social Security. a. Now that you have some expertise in public finance, please provide policy advice on this reform proposal. Describe the benefits and drawbacks of adopting this proposal. b. What are the implications for behaviors, such as employment, work hours, retirement decisions, etc.? c. Draw a graph to describe the reform and a behavioral change. Explain it.arrow_forward5) Applying the following hypothetical Federal Income Tax Rate Table, for a Single Tax-Filer earning $100,000 annually, calculate the following (Show your Calculations): a) Total Tax Due?b) Marginal Tax Rate? c) Effective Tax Rate? Tax Rate 10% 15% 25% 30% 35% Single Tax Filer Up to $10,000 $10,000 - $40,000 $40,000 – $85,000 $85,000 – $150,000 $150,000 - $400,000arrow_forward7 Aggregate labour hours, L, are given by L = 51*(1-t), where 't' is the rate of income tax. The real wage rate is fixed and equal to 1. At what tax rate is tax revenue maximised? State your answer to 2 decimal places.arrow_forward
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