Tax-free contribution to her retirement fund

Assignment Help Business Economics

Reference no: EM131101510

Suppose in the first five years of working for ABC Corporation Emily earns $50,000 a year after taxes, but ABC makes no yearly contribution toward a retirement plan for her. However, after five years ABC offers Emily a choice of receiving a $5,000 after-tax pay increase or a $5,000 tax-free yearly contribution to a retirement fund.

Explain and illustrate graphically (with budget lines and indifference curves) how Emily could be better off with the $5,000 after-tax pay increase than with the $5,000 tax-free contribution to her retirement fund. Also explain and illustrate with your graph how either form of additional compensation may leave Emily equally well off. (Hint/Suggestion: On your graph put dollars of after-tax income, which can be spent on other goods, on the vertical axis and dollars that can be applied toward retirement on the horizontal axis.)

Reference no: EM131101510

Questions Cloud

Function of the distance from the central market : Consider a market centrally located in Limon, Colorado. Agricultural producers are scattered throughout the eastern plains, and all have to ship their products by truck to the central market. If a commodity is traded in the central market for $4/bu; ..

Demand and supply equations for rice : Assume a colleague at the ERS estimated the following demand and supply equations for rice in the U.S. Calculate the equilibrium price and quantity of rice in the U.S. Calculate the equilibrium price and quantity for South Korea

If investors expect decrease in the value : If investors expect a decrease in the value of the South African rand vis-à-vis other currencies, their actions will cause

Excess reserves and there is no currency drain : The table shows a bank’s balance sheet. The bank has no excess reserves and there is no currency drain. Suppose the bank sells $2 million of government securities to the central bank in an open market operation. As soon as the sale happens, the bank ..

Tax-free contribution to her retirement fund : Suppose in the first five years of working for ABC Corporation Emily earns $50,000 a year after taxes, but ABC makes no yearly contribution toward a retirement plan for her. Explain and illustrate graphically (with budget lines and indifference curve..

Tax-free yearly contribution to retirement fund : Suppose in the first five years of working for ABC Corporation Emily earns $50,000 a year after taxes, but ABC makes no yearly contribution toward a retirement plan for her. However, after five years ABC offers Emily a choice of receiving a $5,000 af..

Federal reserve influences the value of the dollar : Discuss the conditions under which the Federal Reserve influences the value of the dollar. Included in your answer MUST be an examination of how/why the Federal Reserve would sell dollars to banks ans well as how/why the Federal Reserve would buy dol..

User Account

All Pages