Which of the following taxes are not equivalent to each other? Assume that each is a proportional tax.
A. A value-added tax and a consumption tax
B. A general sales tax and an income tax
C. A wage tax and a consumption tax
D. An income tax and a value-added tax
Which of the following taxes are not equivalent to each other? Assume that each is a proportional tax.
A. A value-added tax and a consumption tax
B. A general sales tax and an income tax
C. A wage tax and a consumption tax
D. An income tax and a value-added tax
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Related questions
Assume that, without taxes, the consumption schedule of an economy is as follows:
| GDP, Billions | Consumption, Billions |
| $0 | $40 |
| 100 | 120 |
| 200 | 200 |
| 300 | 280 |
| 400 | 360 |
| 500 | 440 |
| 600 | 520 |
| 700 | 600 |
a. What is the value of the MPC? _______
b. Assume now that a lump-sum tax is imposed such that the government collects $10 billion in taxes at all levels of GDP. Add the after-tax consumption to the table below.
| GDP, Billions | Consumption, before tax | Lump-sum tax | Consumption, After tax |
| $0 | $40 | $10 | Ā |
| 100 | 120 | 10 | Ā |
| 200 | 200 | 10 | Ā |
| 300 | 280 | 10 | Ā |
| 400 | 360 | 10 | Ā |
| 500 | 440 | 10 | Ā |
| 600 | 520 | 10 | Ā |
| 700 | 600 | 10 | Ā |
Ā
Compare the MPC and the multiplier with those of the pretax consumption schedule.
Instructions: Round your answers to 1 decimal place.
MPC after tax = ______ ?
Multiplier after tax = ______ ?
The MPC and multiplier are: higher before the tax OR higher after the tax OR the same before and after the tax ?
Ā
QUESTION 6
Assume that, without taxes, the consumption schedule for an economy is as shown in the table below. Impose a progressive tax such that the tax rate is 0 percent when GDP is $100, 5 percent at $200, 10 percent at $300, 15 percent at $400, and so forth. Determine the new consumption schedule, noting the effect of this tax system on the MPC (tax inclusive) and the multiplier.
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