1
ANSWER KEY FOR TEST 2A
APRIL, 2008
ECON 0110:
MACROECONOMICS
DR. KENKEL
20 questions worth 12.5 points each.
Total Points = 250
1.
Calculate the
taxes due
for a single person using the following data:
Person is single, living alone
Personal exemption deduction is $4,000 per person
Standard deduction is $5,300
Gross income = $78,300
MARGINAL
TAX RATES
TAXABLE INCOME
10%
$
0 - $
8,000
15%
$
8,000 - $
22,000
25%
$ 22,000 - $
70,350
28%
$ 70,350 - $146,750
a.
Less than $10,000
b.
Between $10,000 and $12,499.99
*c.
Between $12,500 and $14,999.99
d.
Between $15,000 and $16,499.99
e.
$16,500 or more
ANSWER: Taxable income = 78,300 – 4,000 – 5,300 = 69,000
.10 X 8,000 = 800
.15 X (22,000 – 8,000) = .15 X 14,000 = 2,100
.25 X (69,000 – 22,000) = .25 X 47,000 = 11,750
800 + 2,100 + 11,750 = 14,650
2.
Assume the following data apply to a certain country:
Year
Consumer
Nominal
Price
GDP
Index
(Trillions)
2005
128.9
12.1
2006
138.6
14.2
2007
149.5
17.5
During 2005, real GDP equals
A.
Less than 8.0 trillion
b.
8.0 to less than 8.7 trillion
*c.
8.7 to less than 9.9 trillion
d.
9.9 to less than 11.8 trillion
e.
none of the above
ANSWER:
100 X (12.1/128.9) = 9.387
3.
When Bob’s disposable income is $26,000, his consumption spending is $15,000.
Suppose his
disposable income increases to $40,000.
Suppose his marginal propensity to consume is .65.
.
His new
consumption spending will be:
*a.
Less than $25,000
b.
between $25,000 and $27,999
c.
between $28,000 and $29,999
d.
between $30,000 and $33,999
e.
$34,000 or higher
ANSWER:
Change in spending = .65 x ($40,000 - $26,000) = .65 x $14,000 = $9,100
New consumption = $15,000 + $9,100 = $24,100