Question

In Jan. 2020 Mary Jones was earning $40,000 in net income and spending $39,000 on a yearly basis. Mary Jones loses her job on April 1, 2020, and regains the same job ---at the same pay ---exactly six months later on October 1, 2020. During the six month layoff period, in the first three months, April, May and June, she earns $600 a week in EXTRA unemployment benefits -- IN ADDITION TO the $347 a week he earns, which is the average UI benefit for the workers in our state. Thus, for these 13 weeks, she earns $947 per week. In the next three months, July, August and September, she earns $347 per week in UI benefits. She and her family cut back on their spending by ten percent during the six months duration of unemployment, but then they go back to spending $39,000 on a yearly basis after he goes back to work. What is her net income level and spending level for 2020? What is his A.P.C. for the year?

Answer 1

Hi

The solution is given as follows:

a) Net Income Level for 2020 = $36,822

The Spending Level for 2020 = $37,050

(b) A.P.C. = Net income / Spending Level = $36,822 / $37,050 = 0.9938

Working

In Year 2020, Mary Jone works for 6 months in Job, i.e. from January 2020 to March 2020 & October 2020 to December 2020. Since the earning and spending is $40,000 per year and $39,000 per year respectively hence earning and spending for 6 months is as follows:

Earning During Job = $40,000 / 12 * 6 = $20,000

Spending at the time when Mary Jone is doing Job = $39,000 /12 * 6 = $19,500

Earning during April, May & June i.e. for 13 weeks = $947 per week * 13 = $12,311

Earning During July, August & September = $347 per week from UI Benefits = $347 * 13 = $4,511

Spending of Mary Jones during the duration of unemployment = Cut of 10% on spending during six month = 90% of Spending for six months = 90% * ($39,000 / 12 * 6) = $17,550

Total Earning for the year = Earning from Job + Earning during April, May & June i.e. for 13 weeks + Earning During July, August & September

= $20,000 + $12,311 + $4,511

= $36,822

The Total Spending of Mary Jones = Spening at the time when Mary Jone is doing Job + Spending of Mary Jones during the duration of unemployment

= $19,500 + $17,550

= $37,050. Ans

I hope I have served the purpose well .

Thanks.