Econ131_PS4_S2010 - Econ 131 - Fall 2010 Professor: Camille...

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Professor: Camille Landais GSI’s: Fran¸cois Gerard and Mark Borgschulte Problem Set 4 Due at start of Final Review Session, TBA. 1) Short Answers Explain you reasoning concisely and carefully. Credit is given based on your explanation. a) You are running for office against a candidate who proposes to initiate welfare reform that will “give more money to the poor without reducing the incentive to work for anyone in the economy.” How would you explain to your constituents that this is truly a promise that cannot be delivered? b) An optimal progressive income tax scheme features low marginal tax rates on low income people and high marginal tax rates on higher income people. True, False, or Uncer- tain? c) The EITC program in the US encourages labor supply since it gives a tax credit to poor people. True, False, or Uncertain? d) A large study is conducted to evaluate the effects of income taxation. Individuals are randomized into two groups and faced with different tax rates. The study finds that individuals in both groups work the same number of hours per week on average. The study concludes that “taxation barely distort behavior and do not create efficiency costs.” Do you agree with this conclusion? 1
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This note was uploaded on 07/15/2010 for the course ECON 131 taught by Professor Karp during the Spring '07 term at University of California, Berkeley.

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Econ131_PS4_S2010 - Econ 131 - Fall 2010 Professor: Camille...

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