- Rely as little as possible on automatic stabilizers 19. The paradox of thrift is an example of: - Too much saving relative to exports - A fallacy of composition - Automatic stabilizers - Fractional reserve banking 20. If the US dollar purchases more Mexican pesos: - The dollar has depreciated - The peso has appreciated - Both the dollar and the peso have appreciated - The peso has depreciated 21. True/False: It is possible for a country to invest more than it saves while running a balanced fiscal budget and a trade surplus. - True - False.

1. 0. Suppose that a subsidy plan is introduced for low-income workers. Under the plan an unmarried
worker with two children would receive a tax credit of 30% for income less than or equal to $10,
000. In addition, the maximum tax credit would be maintained until income reaches $20,000 after
which it is taxed away at a rate of 20%. In addition, you are told that this individual has a maximum
of 4,000 hours of leisure per year and earns a wage of $15 per hour. a) Calculate the level of
income at which there is no tax credit. b) Illustrate diagrammatically the three different "zones"
pertaining to this program. c) If this worker is currently earning $24,000 per year, calculate and
illustrate the government subsidy.