Ask Microeconomics Expert

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

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?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M951928

Have any Question?


Related Questions in Microeconomics

Question show the market for cigarettes in equilibrium

Question: Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in public. Label the equilibrium private market price and quantity as Pm and Qm. Add whatever is needed to the mode ...

Question recycling is a relatively inexpensive solution to

Question: Recycling is a relatively inexpensive solution to much of the environmental contamination from plastics, glass, and other waste materials. Is it a sound policy to make it mandatory for everybody to recycle? The ...

Question consider two ways of protecting elephants from

Question: Consider two ways of protecting elephants from poachers in African countries. In one approach, the government sets up enormous national parks that have sufficient habitat for elephants to thrive and forbids all ...

Question suppose you want to put a dollar value on the

Question: Suppose you want to put a dollar value on the external costs of carbon emissions from a power plant. What information or data would you obtain to measure the external [not social] cost? The response must be typ ...

Question in the tradeoff between economic output and

Question: In the tradeoff between economic output and environmental protection, what do the combinations on the protection possibility curve represent? The response must be typed, single spaced, must be in times new roma ...

Question consider the case of global environmental problems

Question: Consider the case of global environmental problems that spill across international borders as a prisoner's dilemma of the sort studied in Monopolistic Competition and Oligopoly. Say that there are two countries ...

Question consider two approaches to reducing emissions of

Question: Consider two approaches to reducing emissions of CO2 into the environment from manufacturing industries in the United States. In the first approach, the U.S. government makes it a policy to use only predetermin ...

Question the state of colorado requires oil and gas

Question: The state of Colorado requires oil and gas companies who use fracking techniques to return the land to its original condition after the oil and gas extractions. Table 12.9 shows the total cost and total benefit ...

Question suppose a city releases 16 million gallons of raw

Question: Suppose a city releases 16 million gallons of raw sewage into a nearby lake. Table shows the total costs of cleaning up the sewage to different levels, together with the total benefits of doing so. (Benefits in ...

Question four firms called elm maple oak and cherry produce

Question: Four firms called Elm, Maple, Oak, and Cherry, produce wooden chairs. However, they also produce a great deal of garbage (a mixture of glue, varnish, sandpaper, and wood scraps). The first row of Table 12.6 sho ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As