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Assoli18 [71]
3 years ago
15

Suppose that the government introduces a tax on interest earnings. That is, borrowers face a real interest rate of r before and

after the tax is introduced, but lenders receive an interest rate of (1 − x)r on their savings, where x is the tax rate. We will analyze what happens when the tax rate x increases from zero to some value greater than zero, with r assumed to remain constant. [Hint: When x = 0, you would have a normal straight budget constraint like we’ve seen in the lecture.]
1.) Show the effects of the increase in the tax rate on a household’s lifetime budget constraint. [Hint: Draw what the lifetime budget constraint looks like when x = 0. Then show how that changes when x > 0.]
2.) Suppose the household was initially a borrower when x = 0. Graphically show how the increase in the tax rate x affect the optimal choice of consumption (in the current and future periods) and saving for this household. Specifically, show how the income and substitution effects matter for your answer.
3.) Suppose the household was initially a lender when x = 0. Graphically show how the increase in the tax rate x affect the optimal choice of consumption (in the current and future periods) and saving for this household. Specifically, show how the income and substitution effects matter for your answer.

Business
1 answer:
soldi70 [24.7K]3 years ago
4 0

Answer

The answer and procedures of the exercise are attached inthe following image.

Explanation  

Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.  

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marysya [2.9K]
I think the correct answer from the choices listed above is option A. The basic savings that will typically offer the lowest interest rate. <span>The </span>Basic Savings<span> Accounts is the most affordable interest earning savings account offered by the Bank. Hope this answers the question.</span>
4 0
3 years ago
Read 2 more answers
Conley Company has fixed costs of $8,151,000. The unit selling price, variable cost per unit, and contribution margin per unit f
cluponka [151]

Answer:

Explanation:

Zoro is 80% and 20%, respectively. Determine the break-even point in units of Yankee and Zoro.

5 0
2 years ago
Which economic system leaves production decisions completely up to the producers? 1. mixed economy 2. command economy 3. planned
ozzi

Answer:

4. free-market economy

Explanation:

Free-market economy -

A free market refers to the economic system which depends on the demand and supply , where the control of government is nil , is referred to as free - market economy.

It helps to provide all the voluntary exchange occurring in the economy.

The range of the free market economy of a particular country , is present in between very large or completely black market.

Hence, from the given statement of the question,

The correct term is free - market economy.  

7 0
3 years ago
Managerial accounting is governed by generally accepted accounting principles (gaap). a. true b. false
diamong [38]

This is a False Statement.

Generally Accepted Accounting Principles (GAAP) need not be followed by managerial accountants when preparing management reports.

Specifically, management accounting aims to

  • provide Information for internal Organisation managers
  • providing details to governmental regulating bodies
  • Information for shareholders, the accounts payable department, and other parties outside the company
  • information to shareholders, accounts payables, and other parties outside the company, as well as information to management inside the firm.

To Learn more about Management Accounting, Click the links.

brainly.com/question/21597572

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3 0
1 year ago
Campbell Co. has net sales revenue of $1,340,000, cost of goods sold of $760,900, and all other expenses of $299,000. The beginn
Softa [21]

Answer:

3.50

Explanation:

Given the information above, we need to find first the Average fixed assets.

Average fixed assets = Fixed assets beginning balance + Fixed assets ending balance / 2

= ($370,000 + $398,000) / 2

= $384,000

Then , the fixed assets turnover will be calculated as;

Fixed assets turnover = Net revenue / Average net fixed assets

= $1,340,000 / $384,000

= 3.50

Therefore, Campbell Co. Fixed asset turnover ratio would be 3.50

5 0
2 years ago
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