Tutor profile: Noah S.
Subject: Personal Finance
What is the difference between a Roth IRA and a traditional IRA?
A Roth IRA is a retirement savings account that uses after-tax contributions for investments. This mean that you pay taxes on the income when you earn it, and will not have to pay taxes upon withdrawal (as long as you follow the guidelines of withdrawal). This is different from a traditional IRA account where the income you earn is not taxed (it is deducted from your taxable income), and you will pay taxes on that money when you withdraw. The main difference is whether you pay the taxes on your taxes before or after you reach retirement age (this decision will be based on several factors such as current levels and future speculation of income and tax regulation). A Roth IRA can also give more flexibility than a traditional IRA as you are able to withdraw contributions (money you've put in the account, but not earnings on that money) without tax or penalty, while traditional IRA have penalties for early withdrawals.
Find the slope of a line that passes through the points (3,1) and (-1,4)
The slope of this line would be -3/4. To find the slope of the line through the points (3,1) and (-1,4), we must use the point-slope formula m= (y2-y1)/(x2-x1). In this problem we will label the first set of points (3,1) as (x1,y1) and the second set (-1/4) as (x2,y2). When we plug these into the point-slope formula we will see that m = (y2 - y1) / (x2 - x1) = (4 - 1) / (-1 - 3) = 3/-4 or -3/4
Is an equal dollar amount of government spending increase or a tax cut more effective in bringing a recessionary economy back towards equilibrium?
A government spending increase would have a greater effect on bringing a recessionary economy back towards equilibrium. Both actions would cause an increase in aggregate demand, however the magnitude will vary. The spending multiple (1/Marginal Propensity to Save) will always yield a greater result than the tax multiplier (-Marginal Propensity to Consume/Marginal Propensity to Save). Therefore, an equal dollar amount would have a greater effect as a government spending increase rather than a tax cut. For example, in a given economy had a Marginal Propensity to Consume (MPC) of .75 (therefore a Marginal Propensity to Save (MPS) of .25): A $10,000,000 government spending increase would result in $40,000,000 increase in the economy. [10,000,000 x (1/.25)] A $10,000,000 tax cut would result in a $30,000,000 increase in the economy. [-10,000,000 x (-.75/.25)]
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