.Help me with the following attached questions.
4. After the pandemic is over, the loss of government revenue due to the economic lockdown and the cost of the worker compensation scheme, made government debt soar and the treasury asks you for advice on how to reduce government debt. a) Currently, the citizens of Korona pay a flat tax on labour income of 20% and a proposal by the minister is to increase the tax rate to 30% if income exceeds the threshold of $20,000. Give your assessment of the likely effect of the proposal on labour supply, paying particular attention to the underlying forces at work. Briefly comment on how these forces may affect government revenue. [You can include a graph if it helps to illustrate your reasoning; word limit 250 words; 8 marks]. b) An alternative policy proposes to introduce a tax on inheritances to raise the same amount. Assess the effect on welfare of this inheritance tax allowing for different behavioural responses. [word limit 200 words; 6 marks]. c) Contrast the proposals in a) and b) regarding the potential for off-shore tax evasion. [word limit 200 words; 6 marks].1. A 10 year bond, which has just been issued, provides semiannual coupons of 6% a year in arrears. It is redeemed at par. What price is paid (per $100 nominal value) if bond yields an annual effective rate of interest of 8%? Ans: $87.37 2. A 20-year zero-coupon bond is redeemed at par. If the price paid per $1,000 face amount is $538.76, determine the annual effective yield rate. Ans: 3.14% 3. A bond pays semi-annual coupons at an annual rate of 10% of the nominal value. The annual effective yield to maturity is currently 4%, and the price paid per $1,000 par value is $1,404.06. If the bond is redeemed after 7 years, calculate the redemption payment. Ans: $1,050.00 4. An n-year bond pays annual coupons of 5% semiannually. The annual effective yield is 8% and the price per $100 par value is $86. The bond is redeemed at 110%. Find n. Ans: 10.2 A More General Ramsey Model In this and the next three sections, we extend the basic Ramsey model along a number of dimensions. In this section we include elastic labor supply and a more general production technology. We also present a more detailed derivation of our results. To allow for elastic labor supply, we use a form of preferences over consump- tion and labor proposed by King, Plosser, and Rebelo (1988). King-Plosser- Rebelo preferences have the property that the uncompensated elasticity of labor supply is zero. This feature has the appealing implication that long-run growth caused by technological progress does not lead to a trend in hours worked. The compensated (constant-consumption) elasticity of labor supply need not be zero, however. This parameter, which we will call o, will have a significant role in some of our results. 2.1 Firms We begin with production. Assume there are many identical firms in competi- tive input and output markets, producing output with constant returns to scale technology according to the production function Y = F(K, N), The feedback depends critically on the tax rate. If the capital tax rate were 0.40 instead of 0.15, and all other parameter values are the some, the feedback from a capital tax cut would be 75 percent rether than 50 percent. The literature on taxation in the United States suggests that our choice of 7% = 7 = 0.25 is within the range of plausible estimates, although perhaps a bit conservative. Mendoza, Romin, and Tesar (1994) estimate a 40.7 percent capital tax rate (applied to corporate and non-corporate capital) for the United States in 1986, the last year of their series. This is above the estimate given by Gravelle (2004), who reports a rate of 37 percent for all capital in that year. Gravelle extends her estimates through 2003, by which point the capital tax rate had fallen to 17 percent. Mendoza et al. estimate a labor tax rate of 28.5 percent in 1980, together with a consumption tax of about 5 percent; these tax rates would combine to be equivalent to a tax on labor of about 31 percent.3. To slow down transmissions of the viral disea 'lockdown" hence ordering business to shut and the citizens to adhere to limiting physical distancing, but leaving the timing of the lockdown to be decided by the two regional governments of Krona. Assume that both regions have roughly the same population size of 10 million citizens. Region 1 entered lockdown at the beginning of month 3, region 2 entered lockdown at the beginning of month 2. See Next Page The following table shows the cumulative infections and fatalities due to the viral disease over time and the time of the lockdown in each region at the end of each month. Month 1 Month 2 Month 3 Month 4 cases fatalities cases fatalities cases fatalities cases fatalities Region 1 100 3 5000 300 9000 540 15000 900 Region 2 100 5 2200 130 4500 270 5500 330 a) The minister for the economy argues that after both regions entered lockdown, in month 3 the number of cases in region 2 more than doubled, whereas the growth rate is lower in region 1 arguing that the lockdown was not effective in preventing the spread of the disease. Do you agree? Can you provide a better estimate using your knowledge of empirical methods introduced in the module? [word limit 250 words; 8 marks]. b) What kind of data would you prefer to have to estimate the full impact of the lockdowns on infections and fatalities? Explain how this would help to improve your estimate from the previous question. [word limit 200 words; 4 marks]. c) In response to the lockdown the economy in region 1 contracted by $1.1bn, and $1.114bn in region 2. What can we learn from these figures about the statistical value of life? [word limit 100 words; 3 marks]. d) Suppose a vaccine against the disease was available at the beginning of month 1 (and assume it works immediately by protecting the citizens from the disease). 60% of population require the vaccine to stop the disease from spreading. The vaccine is available for $20. Should the government introduce the vaccine? State any assumptions you implicitly make underlying your advice and briefly discuss the limitation of your advice. [word limit 250 words; 5 marks]
