Homework Help Forum: Economics

Posted by Anonymous on Friday, November 6, 2009 at 9:47pm.

Suppose that a nation has implemented a system for applying a tax rate of 2 percent to the incomes earned by the 10 percent of its residents with the highest income. All funds collected are then transferred directly to the 10 percent of the nation's residents with the lowest incomes. a)What is the general effect on the shape of a lorenz curve based on pretax incomes? b)What is the general effect on the shape of lorenz curve based on after-tax incomes?

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