Analyze the impact of each type of tax on savings

Assignment Help Econometrics
Reference no: EM13212162

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).

Reference no: EM13212162

Questions Cloud

Find the total heat loss per m length of the steam line : find the total heat loss per m length of the steam line. Find also the temperature at the interface of steam and insulation.
Describe the production function for campaign votes : A political campaign manager must decide whether to emphasize television advertisements or letters to potential voters (mail outs) to potential voters in an election campaign. Describe the "production function" for campaign votes.
Calculate the force required in direct extrusion : Calculate the force required in direct extrusion of 1100-O aluminum from a diameter of 6 in. to 2 in. Assume that the redundant work is 30% of the ideal work of deformation, and the friction work is 25% of the total work of deformation.
Identify the hypothesis : Apply the sociological perspective to a variety of socioeconomic and political problems and use technology and information resources to research issues in sociology.
Analyze the impact of each type of tax on savings : 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 im..
Calculate temperature at the start of combustion : engine B is supercharged with after cooling and has cylinder inlet condition of 80c and 130 k pa to avoid knock problem it is desirable to have the air-fuel temperature at the start of combustion in engine B to be the same as in engine A calculate..
What price should john set for a carwash : If John were to lower his price by $1, he would sell more carwashes, and still be able to charge a price above his marginal cost. Explain intuitively why it would not be profit-maximizing to do so. What price should John set for a carwash.
Determine the ration of the time taken of cutting : in a crank or slotted lever quick mechanism the distance between the fixed centre is 150 mm and driving crank is 75 mm. determine the ration of the time taken of cutting & return strake .
What is the expected annual cost savings in dollars : A 50 hp motor with an efficiency of 0.80 is to be replaced by a newer model motor with an efficiency of 0.90. The motor is expected to operate 3000 hours per year. The cost of electricity in our area is $0.06 per kWhr.

Reviews

Write a Review

Econometrics Questions & Answers

  Calculate gdp-ni and ndp

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..

  What would result in even higher profits

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..

  Question about elasticities of demand

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:

  What is the present worth of college degree

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.

  Explain the changes in the price and in the number of firms

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..

  What was the real exchange rate between the uk

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.

  What is lowest amount firm 2 will accept to stop producing

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

  What is the opportunity cost for maria to cut logs

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..

  What is the profit maximizing condition for the firm

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.

  Does the production function exhibits increasing returns

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..

  What is the output of each firm if they collude to produce

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..

  Calculate the accounting profit and the economic profit

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)..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd