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Suppose that a country has 20 million households. Ten million are poor households that each have labor market earnings of $20,000 per year and 10
Suppose that a country has 20 million households. Ten million are poor households that each have labor market earnings of $20,000 per year and 10 million are rich households that each have labor market earnings of $80,000 per year. Part 2 If the government enacted a marginal taxLOADING... of 10 percent on all labor market earnings above $20,000 and transferred this money to households earning $20,000 or less, would the incomes of the poor rise by $8,000 per year? A. No. Workers in rich and poor households would work less because of the marginal tax. B. Yes. 10% of $80,000 is $8,000; therefore, $8,000 from each rich household would be transferred to each poor household. C. No. Only workers in rich households would work less because of the marginal tax. D. There is not enough information to determine household behavior in this case
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