Saving, marginal propensity to consume and marginal propensity to save.

Question

Want to see the full answer?

Answer 1

Question

Chapter 23, Problem 23.2.11PA

To determine

Saving, marginal propensity to consume and marginal propensity to save.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Suppose that Antonio, an economist from a business school in Georgia, and Caroline, an economist from a university in Massachusetts, are arguing over budget deficits. The following dialogue shows an excerpt from their debate: Caroline: Most people recognize that the budget deficit has been rising considerably over the last century. We need to find the best course of action to remedy this situation. Antonio: I believe that a cut in income tax rates would boost economic growth and raise tax revenue enough to reduce budget deficits. Caroline: I actually feel that raising the top income tax rate would reduce the budget deficit more effectively. The disagreement between these economists is most likely due to . Despite their differences, with which proposition are two economists chosen at random most likely to agree? Having a single income tax rate would improve economic performance. Immigrants receive more in government benefits than they contribute in taxes.…

Suppose that Shen, an economist from a research facility in Washington, and Valerie, another economist from an investigative reporting group, are both guests on a popular science podcast. The host of the podcast is facilitating their debate over budget deficits. The following dialogue represents a portion of the transcript of their discussion: Valerie: Most people recognize that the budget deficit has been rising considerably over the last century. We need to find the best course of action to remedy this situation. Shen: I believe that a cut in income tax rates would boost economic growth and raise tax revenue enough to reduce budget deficits Valerie: I actually feel that raising the top income tax rate would reduce the budget deficit more effectively. The disagreement between these economists is most likely due to Despite their differences, with which proposition are two economists chosen at random most likely to agree? Business managers can raise profit more easily by reducing costs…

Assume that in a given country, tax revenues, T, depend on income, I, according to the formula T= - 4,000 + 0.21 Thus, for example, when a household has an income of $50,000, its tax burden is -4,000+ 0.2 x 50,000, or $6,000. Is this a progressive tax schedule? [Hint: Compute average tax rates at several different levels of income.] Now let's generalize the tax schedule in this problem to: T= a + ti where a and t are numbers. (For example, in the tax schedule above, a =-4,000 and t = 0.2.) Write down a formula for the average tax rate as a function of the level of income. Show that the tax system is progressive if a is negative, and regressive if a is positive. (Hint: The average tax rate is TIL.]