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NEW YORK UNIVERSITY
Department of Economics
V/C31.0233
Edward Wolff
Poverty and Income Distribution
Fall, 2007
Final Exam ANSWERS
December 19, 2007
Answer all the questions.
Make your answers brief and to the point.
Use diagrams where
necessary (and be sure to label the diagrams properly). Show all calculations. (There are 100 points
in the exam).
1. Suppose the marginal tax rates for a single individual are as follows:
(i) zero up to $10,000; (ii)
10% from $10,000 to $49,999 (iii) 20% from $50,000 to $99,999; and (iv) 30% for incomes equal
to or above $100,000.
A. Show the marginal tax rates on a diagram.
[4
points
]
B. Compute the
average
tax rate at the following income levels: (i) $15,000; (ii) $40,000; (iii)
$80,000 and (iv) $150,000
.
[
16 points
]
(i)
ATR = [0 + (1500010000)*.1] / 15000 =
500 / 15000 = 3.33%
(ii)
ATR = [0 + (4000010000)*.1] / 40000 =
3000 / 40000 = 7.5%
(iii)
ATR = [0 + (5000010000)*.1 + (8000050000)*.2] / 80000 = (4000+6000) / 80000 = 12.5%
(iv)
ATR = [0 + (5000010000)*.1 + (10000050000)*.2 + (150000100000)*.3] / 150000 =
(4000+10000 + 15000) / 150000 = 19.33%
MTR by Income
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0
10000
30000
49999
60000
80000
100000
120000
Income
MTR
MTR
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Calculate the Duncan and Duncan index for the following distributions:
[15 points]
Number of
Number of
Men Employed
Women Employed
ABS.
Occupation
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This note was uploaded on 07/11/2008 for the course ECON Vc310233 taught by Professor Wolff during the Spring '08 term at NYU.
 Spring '08
 WOLFF
 Economics

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