The Amount of Income Tax That Must Be Paid on an Additional

question 1

Multiple Choice

The amount of income tax that must be paid on an additional dollar of income is determined by the

• A)total tax rate.
• B)highest tax rate.
• C)payroll tax rate.
• D)marginal tax rate.
• E)average tax rate.

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Definitions:

Fiscal Policy

Government adjustments in spending levels and tax rates to monitor and influence a nation's economy.

Economic Activity

Actions that involve the production, distribution, and consumption of goods and services within an economy.

Progressive Tax

A tax system in which the tax rate increases as the taxable amount increases, often targeting higher incomes with higher tax rates.

Monetary Policy

The process by which a central bank or monetary authority manages the supply of money and interest rates to achieve macroeconomic objectives like controlling inflation, consumption, growth, and liquidity.