Scenario 20-1 ​

question 138

Multiple Choice

Scenario 20-1
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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:

Progressive Income Tax

A tax system in which the tax rate increases as the taxable amount increases, generally applied to income tax to ensure higher earners pay a larger percentage of their income.

Unemployment Compensation

Unemployment Compensation is a government-provided financial assistance to individuals who have lost their job through no fault of their own, aiming to support them temporarily.

Tax Revenue

The income that is collected by the government through various forms of taxes, used to fund public services and obligations.

Government Spending

Expenditures by government bodies on goods and services that influence the economy's overall activity.