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Attachment 2 1 2

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Economics
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Saudi electronic university
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Homework
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Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University
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College of Administrative and Financial Sciences
Assignment 2
ECON201 (1
st
Term 2021-2022)
Deadline: 15/11/2021 @ 23:59
Course Name: Macroeconomics
Student’s Name:
Course Code: ECON201
Student’s ID Number:
Semester: I
CRN:
Academic Year: 1442/1443 H, 1
st
Term
For Instructor’s Use only
Instructor’s Name: Eman Alshami
Level of Marks: High/Middle/Low
Instructions PLEASE READ THEM CAREFULLY
This assignment is an individual assignment.
Due date for Assignment 2 is 15
th
November 2021.
The Assignment must be submitted only in WORD format via allocated folder.
Assignments submitted through email will not be accepted.
Students are advised to make their work clear and well presented, marks may be
reduced for poor presentation. This includes filling your information on the cover
page.
Students must mention question number clearly in their answer.
Late submission will NOT be accepted.
Avoid plagiarism, the work should be in your own words, copying from students
or other resources without proper referencing will result in ZERO marks. No
exceptions.
All answered must be typed using Times New Roman (size 12, double-spaced)
font. No pictures containing text will be accepted and will be considered
plagiarism).
Submissions without this cover page will NOT be accepted.

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Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University
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

College of Administrative and Financial Sciences
Assignment Purposes/Learning Outcomes:
After completion of Assignment-2 students will able to understand the
LO 1.2: Describe how to evaluate macroeconomic conditions such as unemployment,
inflation, and Growth
LO 1.3: Recognize the fundamental determinant's of a nation's long-run economic
growth.
Assignment 2 Questions: Week 6 to Week 10: - [5 Marks]
Assignment 2
Case Study
When taxes induce people to change their behavioursuch as inducing Jane to buy less
pizzathe taxes cause deadweight losses and make the allocation of resources less
efficient. As we have already seen, much government revenue comes from the individual
income tax in many countries. In a case study in Chapter 8, we discussed how this tax
discourages people from working as hard as they otherwise might. Another inefficiency
caused by this tax is that it discourages people from saving.
Consider a person 25 years’ old who is considering saving $1,000. If he puts this money in
a savings account that earns 8 percent and leaves it there, he would have $21,720 when he
retires at age 65. Yet if the government taxes one-fourth of his interest income each year,
the effective interest rate is only 6 percent. After 40 years of earning 6 percent, the $1,000
grows to only $10,290, less than half of what it would have been without taxation. Thus,
because interest income is taxed, saving is much less attractive.
Some economists advocate eliminating the current tax system’s disincentive toward saving
by changing the basis of taxation. Rather than taxing the amount of income that people
earn, the government could tax the amount that people spend.
Under this proposal, all income that is saved would not be taxed until the saving is later
spent. This alternative system, called a consumption tax, would not distort people’s saving
decisions.
Various provisions of the current tax code already make the tax system a bit like a
consumption tax. Taxpayers can put a limited amount of their saving into special
accountssuch as Individual Retirement Accounts and 401(k) plansthat escape taxation

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‫المملكة العربية السعودية‬ ‫وزارة التعليم‬ ‫الجامعة السعودية اإللكترونية‬ Kingdom of Saudi Arabia Ministry of Education Saudi Electronic University College of Administrative and Financial Sciences Assignment 2 ECON201 (1st Term 2021-2022) Deadline: 15/11/2021 @ 23:59 Course Name: Macroeconomics Student’s Name: Course Code: ECON201 Student’s ID Number: Semester: I CRN: Academic Year: 1442/1443 H, 1st Term For Instructor’s Use only Instructor’s Name: Eman Alshami Students’ Grade: /5 Level of Marks: High/Middle/Low Instructions – PLEASE READ THEM CAREFULLY • • This assignment is an individual assignment. Due date for Assignment 2 is 15th November 2021. • The Assignment must be submitted only in WORD format via allocated folder. • Assignments submitted through email will not be accepted. • Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page. • Students must mention question number clearly in their answer. • Late submission will NOT be accepted. • Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions. • All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be c ...
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