Question

Suppose social security contributions rise by​ $1 billion while social security benefits also rise by​ $1 billion.​ Further, personal income taxes fall by​ $500 million. As a​ result,
A. disposable income should increase while personal income and national income are unchanged.
B. national​ income, personal​ income, and disposable income should increase.
C. both personal and disposable personal income should increase.
D. personal​ income, disposable personal​ income, and national income remain unchanged.

Answer 1

Answer:

The answer will be A

Explanation:

As the social security contributions and benefits remain the same in proportion, personal and national income will remain the same.

As disposable income is defined as personal income-personal taxes, and the personal income taxes fall by 500 million (included in the contibutions), this would mean that the disposable income increases.