An Employee Earned $62,500 During the Year Working for an Employer

question 192

Multiple Choice

An employee earned $62,500 during the year working for an employer. The FICA tax rate for Social Security is 6.2% of the first $118,500 of employee earnings per calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. What is the amount of total unemployment taxes the employee must pay?

• A) $434.00
• B) $56.00
• C) $378.00
• D) $0.00
• E) $101.50

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Definitions:

Federal Funds Rate

The interest rate banks and other depository institutions charge one another on overnight loans made out of their excess reserves.

Borrowed Reserves

Funds that commercial banks borrow from the central bank to meet reserve requirements, often indicative of a tight monetary policy.

Fed

The Federal Reserve System, which is the central bank of the United States responsible for monetary policy.

Money Supply

represents the total amount of monetary assets available in an economy at a specific time, including cash, coins, and balances held in bank accounts.