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The government is considering two alternative types of taxes. The first is a tax on interest income, the second is a tax on labour income. Both are to be imposed at rate t (i.e., t=.20, or 20%). Your job is to help the government understand the impact of these two taxes on savings decisions. To do so, consider the consumption/savings model we discussed in class where preferences are defined over "consumption when young" (CY) and "consumption when old" (CO), labour income is fixed an earned in the "young" period, and the (before tax) interest rate on savings is r.
a. Write down the intertemporal budget constraint for three situations:i. There is no tax.ii. A tax on labour income is imposed at rate t.iii. The tax on interest income is imposed.
b. In two separate diagrams, analyze the impact of each type of tax on savings. Will savings be expected to rise or fall in each case? Explain (where appropriate invoke a discussion of income and substitution effects).
Using the following national income accounting data, compute (a) GDP, (b) NDP, and (c) NI. All figures are in billions. Category Value, Compensation of employees $216.2, U.S. exports of goods and services 19.8, Consumption of fixed capital 11.8,Gover..
a pricing analyst for QuantCrunch Corporation, a company that recently spent $10,000 to develop a stastical software package. To date, you only have one client. A recent international study revealed that this client's demand for your software is Q..
Suppose income declines by 2.85%, how much do I have to cut value in order to maintain existing customers and it begins with being given a regression analysis that has the following:
Perry is a freshman, he estimates that the cost of tuition, books, room and board, transportation, and other incidentals will be $30000 this year. He expects these costs to rise about $1500 each year while he is in college.
Firm z, operating in a perfectly competitive market, can sell as much or as little as it wants of a good at a price of $16 per unit. Its cost function is C = 50 + 4Q +2Q^2. The associated marginal cost is MC = 4 +4Q, and the point of minimum avera..
Suppose that last year, the nominal exchange rate between the Japanese yen and the British pound was ¥225.0 per £1.0, one unit of Japanese output cost ¥2000, and one unit of British output cost £8.0. What was the real exchange rate between the U.K.
There are 2 firms in industry A. You are firm 1, and your rival is firm 2. The market demand and the firm's cost functions are as follows Demand: P=200-2(Q1+Q2) Firm 1: Tc1= 2Q1 Firm 2: Tc1=10Q2
maria and emmanuel need to cut logs for shelter or gather food to stay alive per day. maria produces 10 cut logs of shelter and 10 baskets of food. emmanuel produces 5 cut logs of shelter and 8 baskets of food. a) what is the opportunity cost for m..
Suppose that there is an adverse oil supply shock. Show the impact that this has on the production function, the labor market (i.e. on equilibrium wage and labor), and on the actual amount of output. SHOW a diagram and DISCUSS your findings.
A farmer uses M units of machinery and L hours of labor to produce C tons of corn. A) Suppose the production function is C = L(0.5) x M(0.75), does the production function exhibits increasing returns to scale, decreasing returns to scale or consta..
Once again, assume Cournot competition in an industry in which market demand is described by P = 260 - 2Q and in which each firm has a marginal cost of 20. However, instead of two firms, let there now be four. a. What is the one-period Nash equilibri..
Gomez runs a small pottery firm. He hires one helper at $12,000 per year, pays annual rent of $5000 for his shop, and spends $20,000 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth)..
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