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The town of Greenville has three families, each with one child, and each of which earns $20,000 per year (pre-tax). Each family is taxed $4,000 per year to finance the public school system in the town, which any family can then freely attend. Education spending is $6,000 per student in the public schools. The three families differ in their preferences for education. Though families A and B both send their children to the public school, family B places a greater value on education than family A. Family C places the greatest relative value on education and sends its child to private school.
a. Graph the budget constraints facing each of the three families and draw a possible indifference curve which could correspond to the choice each family makes.
b. The town is considering replacing its current system with a voucher system. Under the new system, each family would receive a $6,000 voucher for education, and families would still be able to send their children to the same public school. Since this would be more costly than the current system, they would also raise taxes to $6,000 per household to pay for it. Draw the budget constraint the families would face under this system.
Which policy do you believe would be more effective in the short term for accomplishing these goals.
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In 2012, Balnur taught music and earned $20,000. She also earned $4,000 by renting out her basement. On January 1, 2013, she quit teaching, stopped renting out her basement, and began to use it as the office for her new Web site design business.
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Illustrate what are they, and what impacts do they have on the outcomes of Keynesian countercyclical policies.
Suppose that there are two products: soda along with clothing. Both Brazil and the United States produce each product.
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