Vertical Equity States That Taxpayers with a Greater Ability to Pay

question 123

Multiple Choice

Vertical equity states that taxpayers with a greater ability to pay taxes should

• A)contribute a decreasing proportion of each increment in income to taxes.
• B)contribute a larger amount than those with a lesser ability to pay.
• C)be less subject to administrative burdens of a tax.
• D)be less subject to tax distortions that lead to deadweight losses.

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Definitions:

Interest Rate Price Risk

The potential for an investment’s value to change due to a fluctuation in the absolute level of interest rates, illustrating the inverse relationship between price and interest rates.

Zero Coupon Bond

A bond that does not pay periodic interest payments but instead is issued at a discount to its redemption value.

Foreign Bond

A bond issued in a domestic market by a foreign entity, in the domestic market’s currency, to raise capital from investors in that country.

Canadian Dollars

The Canadian dollar is the currency of Canada, often represented by the symbol C$ or CAD, and it is used throughout the country for financial transactions.