In the Two-Period Model, Suppose a Household's Income in the First

question 28

Multiple Choice

In the two-period model, suppose a household's income in the first period is $40,000, income in the second period is $50,000, and the real interest rate is 25 percent.The government proposes to give the household a tax rebate of $5,000 in the first period, but will tax the household an additional $5,000 × 1.25 = $6,250 in the second period.The household is _____under the government's tax rebate plan compared with before.

• A)better off
• B)worse off
• C)equally well off
• D)possibly better off and possibly worse off

---

Definitions:

Widget Producer

A generic term often used to describe a manufacturer that specializes in producing a non-specific, often hypothetical, item or product.

Shirking

The act of avoiding or neglecting one's duties or responsibilities, typically in the context of employment.

Performance Incentives

Rewards or bonuses offered to employees or managers to motivate them to achieve specific performance targets.

HVAC Cooling System

A component of Heating, Ventilation, and Air Conditioning (HVAC) systems dedicated to reducing and maintaining cooler air temperatures in a space.