Scenario 20-1 ​

question 138

Multiple Choice

Scenario 20-1
​
The government is proposing switching from a progressive tax system in which families pay 15% of the first $50,000 earned, 25% of the next $50,000 earned, and 35% of any income over $100,000 to a tax system in which every family pays 20% of their income minus $20,000.
-Refer to Scenario 20-1. Which group would be most in favor of the switch from the current progressive tax policy to the new policy?

• A)Utilitarians, because they want to maximize the utility to the worst-off person in society
• B)Liberals, because of the maximin criterion
• C)Libertarians, because they believe in diminishing marginal utility
• D)All three groups would be equally in favor of the switch.

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Definitions:

U.S. Newspapers

Print or digital publications in the United States that provide news, analysis, opinion, and features on a variety of topics.

Money Supply

The complete aggregation of monetary assets within an economy at a particular point, including cash, coins, and the funds in checking and savings accounts.

Velocity

The rate at which money circulates within an economy, often measured as the ratio of nominal GDP to the money supply.

Price Level

An index that measures the average relative level of prices of goods and services in an economy over a period of time.