Because the Income Tax Structure Is Progressive,the Amount of Taxes

question 18

Multiple Choice

Because the income tax structure is progressive,the amount of taxes paid is a _____.

• A)constant fraction of income throughout the business cycle
• B)larger fraction of income in expansions than in contractions
• C)smaller fraction of income in expansions than in contractions
• D)decreasing function of income in both expansions and contractions
• E)constant amount at all levels of output and income

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Definitions:

Induced Consumption

Consumer spending that increases as income rises, and decreases when income falls, reflecting a direct relationship between income and consumption.

Consumption Function

An economic formula that represents the relationship between total consumption and gross national income.

Annual Consumption

The total amount of goods and services used or consumed by individuals or groups within a one-year period.

Disposable Income

Disposable income refers to the amount of money that households have available for spending and saving after income taxes have been accounted for.