Exam 22: Taxes on Savings

Suppose an Individual Retirement Account (IRA)has a contribution limit of $3,000 per year and that prior to the passage of the law establishing IRAs,Carlos was saving $2,500 per year.After the IRAs were established,Carlos saved $2,000 per year.Which statement is TRUE?

Which of the following phrases refers to the taxation of the return from savings?

Suppose the government were to eliminate taxes on interest from savings.According to economic theory,individuals:

Assume that the nominal rate of interest is 10% and the inflation rate is 10%.The tax rate on interest from savings is 25%; in the first period Wes has $100 in savings.Which of the following statements is TRUE?

Suppose that in the first period,a man works,earns income Y,and saves S of the income.In the second (and last)period,the man consumes his savings plus whatever interest it earned (r is the interest rate).What is the price of first-period consumption in this two-period model?

Suppose that Lilistan has two types of citizens: low-income citizens (income = $20,000)and high-income citizens (income = $80,000).Interest income is taxed,and each type of citizen saves 10% of his or her income for retirement.The government is proposing to allow citizens to put money into an IRA,where the contributions would be tax deductible and interest would accumulate tax free.Withdrawals would be taxed as income.The government wants to set a $5,000 annual limit on the accounts.Discuss the effect of this policy on the saving choices of both the low-income and high-income citizens in terms of both income and substitution effects as well as the overall effect.

What is a tax-preferred retirement savings vehicle offered by employers to which the employers often match part or all of employees' contributions?

Which of the following makes it difficult to empirically find the connection between after-tax interest rates and savings?

Which statement about the standard intertemporal choice model is TRUE?

Suppose an Individual Retirement Account (IRA)has a contribution limit of $4,000 per year and that prior to the passage of the law establishing IRAs,Rachel was saving $5,500 per year.Which of the following is the most likely effect?

Suppose an Individual Retirement Account (IRA)has a contribution limit of $3,000 per year and that prior to the passage of the law establishing IRAs,Hamilton was not saving any of his income.After IRAs became available,Hamilton saved $2,000 per year.Which statement is TRUE?

Suppose that in the first period,a man works,earns income Y,and saves S of the income.In the second (and last)period,the man consumes his savings plus whatever interest it earned (r is the interest rate).Suppose that the government taxes interest income at a rate of t.What is the man's consumption in the second period?

Which is a retirement savings account specifically designed for the self-employed,under which up to a set amount can be saved each year on a tax-free basis?

Which statement is TRUE?

Suppose that in the first period,a woman works,earns income Y,and saves S of the income.In the second (and last)period,the woman consumes her savings plus whatever interest it earned (r is the interest rate).Suppose that the government taxes interest income at a rate of t.As a result of the tax:

Which of the following is NOT one of the four major tax incentives for retirement savings?

Suppose that in the first period,a woman works,earns income Y,and saves S of the income.In the second (and last)period,the woman consumes her savings plus whatever interest it earned (r is the interest rate).How much does the woman consume in the first period?

An individual's savings is defined as the difference between:

Which of the following is a tax-preferred retirement savings vehicle primarily for low- and middle-income taxpayers in which the taxpayers make after-tax contributions but then make tax-free withdrawals later in life?

Which of the following best describes liquidity constraints?