Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 20, Problem 2DQ
To determine
The break-even income.
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What do you think about the income trap - is it a myth or reality? How does the middle-income trap affect the equality and poverty of citizens? What can be done to avoid or escape from the trap?
Answer correctly and explain within 40 mins will give you positive feedback.
Consider
by $150. The average citizen there
spends 90% of each additional dollar of
income earned.
a government that raises taxes
Calculate the total change in income (Y)
that will result.
Carefully follow all numeric directions.
Use a negative number to indicate a
decrease in Y and a positive number
to indicate an increase.
"How can Income Inequality in the United States be Reduced?"
Chapter 20 Solutions
Economics: Principles & Policy
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Similar questions
- Suppose you earned $60,000 per year and pay taxes based on marginal tax rates. The first tax bracket which taxes at 10% ranges from zero dollars to $30,000. The second tax bracket which tax at 25% ranges from 30,001 to $120,000. How much will you pay in total taxes?arrow_forwardhow to find the 90/10 income ratio?arrow_forwardMark Zuckerberg of Facebook and Elon Musk of Space X have taken risks to build to their businesses and been successful at it. The fundamental premise for their success mostly hinges on the ownership of private property and free market forces. For billionaires like them who have made their wealth mostly based on their own effort and perseverance, would it be fair to impose high income tax on them to redistribute their wealth to help the poor?arrow_forward
- Although it is hard to separate the causes of poverty from the effects, there is no doubt that poverty is associated with various economic and social ills. Suppose that you were a policymaker in the government and your goal was to reduce the number of people living in poverty. How would you achieve this goal?arrow_forwardWhat makes the Earned Income Tax Credit (EITC) different from other poverty-fighting programs? The amount of the credit is doubled if the head of household is attending college. The tax credit is phased out gradually, rather than at a specific income cutoff point. The amount of the credit is not determined by the number of dependent children in the household. The EITC doesn't require the recipient to pay a minimum amount of income tax in order to receive the credit. It creates less of an incentive to work than other programs.arrow_forwardHow do factor endowments affect personal income? Examine different provisions employed by the government in dealing with inequality in the distribution of income.arrow_forward
- Many economists believe that a more effective way to supplement the income of the poor is through a negative income tax. Under this scheme, everyone reports his or her income to the government; individuals and families earning a higher income will pay a tax based on that income, while low-income individuals and families receive a subsidy, or negative tax. Assume that the only qualification required to receive a tax credit is low income.arrow_forwardWhen the income tax was first proposed in 1894, it was ruled unconstitutional? True or falsearrow_forwardHow to redistribute income to reduce poverty, without causing loss of economic incentives.arrow_forward
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