If the Average Tax Rate Increases as Income Increases, the Tax

question 68

Multiple Choice

If the average tax rate increases as income increases, the tax is

• A) regressive.
• B) progressive.
• C) an excise tax.
• D) proportional.
• E) a decreasing marginal-rate tax.

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Definitions:

Income

The amount of money received on a regular basis through work or investments.

Multiplier Effect

The relative change in net income resulting from an addition or reduction in expenditure.

Crowding out

A situation in economics where increased government spending displaces private sector spending, either through higher taxes, higher interest rates, or borrowing.

Government Expenditures

The spending by the government sector on goods and services, including public services and public investment.