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

question 8

Multiple Choice

In Econoland in 2005, people with incomes between $20,000 and $30,000 paid 12 percent of their income in taxes and people with incomes between $30,001 and $40,000 paid 15 percent. 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 2006 to:

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

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