In Econoland in 2005, People with Incomes Between $20,000 and $30,000

question 43

Multiple Choice

In Econoland in 2005, people with incomes between $20,000 and $30,000 paid 12% of their income in taxes and people with incomes between $30,001 and $40,000 paid 15%.In 2005, the CPI in Econoland equaled 1.20, and it increased to 1.26 in 2006.If the government of Econoland wants to keep households with a given real income from being pushed up into a higher tax bracket by inflation, the $20,000-to-$30,000 bracket will be changed in 2006to:

• A)$15,873-to-$23,810
• B)$21,000-to-$31,500
• C)$24,000-to-$37,800
• D)$25,200-to-$37,800

---

Definitions:

Marginal Rate

The rate at which one additional unit of a variable is accounted for in the cost-benefit analysis, commonly used in the context of taxation and production.

Tax Rate

The fraction of income or profits that an individual or company needs to pay to the government as tax.

Investment Decisions

The process of deciding where to allocate resources in order to generate the highest possible returns.

Capital Gain

The increase in the value of a capital asset that gives it a higher worth than the purchase price.