Reference no: EM13183372
Assume there are 400 families in a community. Each of these families spends exactly $100 plus one-half of its total income each week on consumption. Half of the 400 families are considered poor-they each receive incomes of $200/week. The other half of the families are considered rich-they each receive incomes of $400/week.
You want to increase total consumption in the community and propose to achieve this goal by taxing the rich families by $100/week and distributing the tax proceeds to the poor families to spend. As a result, each family in the community would have a net weekly income of $300.
1. Based on the assumption that each family spends $100 plus one-half of its total income each week, what is the total weekly consumption spending of a poor family prior to instituting the tax? What is the total weekly consumption spending of a rich family prior to instituting the tax?
2. Again, following the assumption that each family spends $100 plus one-half of its total income each week, what is the total weekly consumption spending of a poor family after implementing your tax plan? What is the total weekly consumption spending of a rich family after implementing your tax plan?
3. Thinking in terms of the marginal propensity to consume concept, would your proposal increase total consumption spending?
4. Again, thinking in terms of marginal propensity to consume, under what circumstances would your tax proposal increase total consumption spending?
5. What other policies could be enacted to increase total consumption spending?
|
Determine the purchasing power in terms of year-zero dollars
: If the account increased at a market rate of 15% per year and inflation averaged 3% per year over the entire deposit period, determine the purchasing power in terms of year-zero dollars immediately after the last deposit in year 17. Year 0 = $5000..
|
|
Explain the condensed structural formula of the ester
: Write the condensed structural formula of the ester formed when each of the following reacts with methanol. For example, the ester formed when propanoic acid reacts with methanol is CH3CH2COOCH3.
|
|
Why private firms would not run a lighthouse
: In the old days lighthouses were built along the coast to prevent ships from running aground on rocks in unfamiliar ports. By shining a beam of light over a port and guiding ships away from rocks, these vital buildings reduced the risk for ship ca..
|
|
Compute the number of molecules inside the cell
: Calculate the number of molecules inside the cell, which is 2.2 ?m long and 1.2 ?m in diameter.
|
|
Would your proposal increase total consumption spending
: Assume there are 400 families in a community. Each of these families spends exactly $100 plus one-half of its total income each week on consumption. Half of the 400 families are considered poor-they each receive incomes of $200/week. The other hal..
|
|
Explain why is an endpoint volume
: In terms of uncertainty, why is an endpoint volume of 9 mL less preferred than an endpoint volume of 35 mL? In terms of uncertainty, why is an endpoint volume of 55 mL less preferred than a volume of 35 mL?
|
|
State plants from glucose
: In photosynthesis, plants from glucose (C6H12O6) and oxygen from carbon dioxide and water
|
|
Balance sheet and a statement of cash flows
: Returned $200 of the inventory that it had purchased because the inventory was damaged in transit. The freight company agreed to pay the return freight cost.
|
|
What happens if the economy booms
: Suppose you are appointed to chair the Federal Reserve. Your twin goals are to maintain low inflation and to stabilize economic activity- that is, to keep output at potential. Why are these appropriate goals for monetary policy?
|