In Econoland in 2005, people with incomes between $20,000 and $30,000 paid 12% of their income in taxes and people with incomes between $30,001 and $40,000 paid 15%.In 2005, the CPI in Econoland equaled 1.20, and it increased to 1.26 in 2006.If the government of Econoland wants to keep households with a given real income from being pushed up into a higher tax bracket by inflation, the $20,000-to-$30,000 bracket will be changed in 2006to:
A)$15,873-to-$23,810
B)$21,000-to-$31,500
C)$24,000-to-$37,800
D)$25,200-to-$37,800

Question

Quizplus · Accepted Answer

The correct answer is B because the $20,000-to-$30,000 bracket will be changed in 2006 to $21,000-to-$31,500 to keep households with a given real income from being pushed up into a higher tax bracket by inflation.

In Econoland in 2005, People with Incomes Between $20,000 and $30,000