To Calculate a Tax, You Need to Know:I

question 40

Multiple Choice

To calculate a tax, you need to know:I. the tax baseII. the taxing agencyIII. the tax rateIV. the purpose of the tax

• A) Only IV is correct.
• B) Items I through IV are correct.
• C) Only III is correct.
• D) Only I is correct.
• E) I and III are correct.

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Definitions:

Disposable Income

The total amount of money available for an individual or household to spend or save after taxes have been deducted.

Consumption

The use of goods and services by households, constituting one of the major components of GDP.

APC

Average Propensity to Consume, which is the fraction of income that is consumed rather than saved.

MPS

The marginal propensity to save refers to the portion of each additional dollar of income that is set aside for savings instead of being spent.