The Concept of Vertical Equity Is Derived from

question 5

Multiple Choice

The concept of vertical equity is derived from

• A)the benefit principle.
• B)the ability-to-pay principle.
• C)fiscal federalism.
• D)the proportionality of the income-tax system.
• E)the understanding that taxes generate distortions in the economy.

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Definitions:

Stock Investment

Placing capital into stocks or equity securities of companies to potentially earn returns through dividends or capital gains.

Operating Activity

Transactions and events that are directly related to the primary business operations of a company, such as sales revenue and expense transactions.

Financing Activity

Transactions involved in raising, repaying, or restructuring the capital funding of a company, as reflected in the cash flow statement.

Net Income

The total profit of a company after all expenses, including taxes and operating costs, have been subtracted from revenue.