8. The fact that some degree of redistribution occurs now through the federal income tax and government antipoverty programs does not settle the questions of how much redistribution is appropriate. True or False.

a. False

b. True

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Microeconomics

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Evaluating the Government Policies to Reduce Income Inequality

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Raushan RajLv8

1 Nov 2020

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4. Redistributive philosophies and incentives consider a society comprised of two people. Lorenzo earns an income of $120,000 per year, and Neha earns an income of $35,000 per year. The government considers a redistribution plan that would impose a 20% tax on Lorenzo's income and give the revenue to Neha. Without any incentive distortion, Lorenzo would retain $96,000, and Neha would end up with $59,000. However, let us assume that since Lorenzo will not receive all the income he earns, he decides to work less and earn an income of only $110,000, which will be owed in taxes. With the redistribution plan, Lorenzo will take home an income of _________.

5. The $22,000 that Lorenzo pays in taxes will be transferred by the government to Neha. Let us assume that since Neha now receives payment from the government, she will not work as many hours and will earn an income from work of only $34,000 instead of her initial $35,000. With the redistribution plan, Neha's total income (including the government received) is now______.

6. Without a redistribution plan, total income in this society is______.

7. After the redistribution plan is implemented, the total income in this society is______

8. Therefore, the redistribution plan total income in this society_______(increases/decreases).

9. According to the utilitarian political philosophy, the $22,000 transferred from Lorenzo to Neha will benefit Neha than it hurts Lorenzo. Which of the following statements is true according to this philosophy?

A.The government should definitely institute the plan because it will increase overall utility.

B.The government should not institute the plan because it has no right to take money from one person and give it to another.

C. The redistribution may or may not be desirable, depending on the utility gain's relative magnitude and efficiency loss.

plumjellyfish99

2. Determine which scenerios best fits these terms: shoe leather costs, money illusion, menu costs, future price level uncertainty, wealth redistribution, price confusion, and tax distortions. (Some scenerios may not go in to any of the categories because 2 categories are missing)

a. john thins his new salary in NYC will increase his standard of living.(shoe leather costs, money illusion, menu costs, future price level uncertainty, wealth redistribution, price confusion, and tax distortions)

b. a jewelre observes the price of gold rise and wonders if there is a shortage of gold.(shoe leather costs, money illusion, menu costs, future price level uncertainty, wealth redistribution, price confusion, and tax distortions)

c. Kallie is taking more trips to the ATM now than in the past.(shoe leather costs, money illusion, menu costs, future price level uncertainty, wealth redistribution, price confusion, and tax distortions)

d. your grandmothers savings account pays 2% interest, but inflation is 5%.(shoe leather costs, money illusion, menu costs, future price level uncertainty, wealth redistribution, price confusion, and tax distortions)

e. the CEO of GM worries that his revenue revieved in the future wontn cover the expenses he incurs today. (shoe leather costs, money illusion, menu costs, future price level uncertainty, wealth redistribution, price confusion, and tax distortions)

f. Carson is angry because the price of donuts increased from $1 to $2 since last week.(shoe leather costs, money illusion, menu costs, future price level uncertainty, wealth redistribution, price confusion, and tax distortions)

g. Jim is reluctant to sell his stocks at the end of the year. (shoe leather costs, money illusion, menu costs, future price level uncertainty, wealth redistribution, price confusion, and tax distortions)

8. In 2015, the consumer price index (CPI) was 238,000 whereas it was about 100 in 1982. Suppose that one of your parents had a job that paid $28000 in 1982 and a job that paid $60,000 annually in 2015. Relative to 1982, we could say that your parents nominal income (increased, decreased or stayed the same) in 2015 and that your parents real income (increased, decreased or stayed the same).

Instructions: Review and respond to at least two of your classmates' posts by sharing any ideas you may have about how households and businesses can protect themselves against inflation.

Please help with a response to the following:

The government tries to restrain inflation because it causes an unintended and undesirable redistribution of income and wealth (Amacher, Pate 2012). That is when a lender who is in the driver's seat when providing a loan to a person can charge a low-interest rate to entice people to borrow money at that low rate. Now if the Feds were to raise the interest rate even a quarter of a percent this could turn the tables from the lender over to the borrower. In the first scenario, the Lender will make a small profit over the long term with the low-interest rates. If the nation's interest rate increases, the value of the dollar goes down and the Lender ends up making less back than they loaned. This causes the redistribution of the income to favor the borrower.

Once inflation starts to happen it is a trickle-down effect on the consumer in the long run. Eventually, the consumer will start to pay inflated rates in some way through the goods and services they purchase. Those that are on fixed incomes will be adversely affected because as their income does not increase but the cost of goods does, they will have to find ways to cut their spending in order to make ends meet. This could be done without eating out as often, buying cheaper and fewer quality foods, or shopping at lower quality stores just to save the extra dollars that inflation has cost them. People who are on fixed incomes have to become more creative in order to still enjoy some qualities in life when times get tight.