Which of the Following Statements Correctly Describes How Taxes Redistribute

question 35

Essay

Which of the following statements correctly describes how taxes redistribute income across different households in an economy?
A) The richest 40 percent of households increase their share of income.
B) The poorest 60 percent of households increase their share of income.
C) Taxes have no effect on the distribution of income.
D) The poorest 20 percent of households receive 20 percent of their income from the government.
E) The richest 20 percent of households increase their share of income and the poorest 20 percent decrease their share of income.

• A) The richest 40 percent of households increase their share of income.
• B) The poorest 60 percent of households increase their share of income.
• C) Taxes have no effect on the distribution of income.
• D) The poorest 20 percent of households receive 20 percent of their income from the government.
• E) The richest 20 percent of households increase their share of income and the poorest 20 percent decrease their share of income.

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Definitions:

Preferred Stock

Preferred stock is a class of shares that offers dividends and ownership in a company but typically does not confer voting rights, with dividends received before common shareholders.

Par Value

The nominal or face value of a bond, share of stock, or coupon as indicated on a certificate or instrument.

Net Income

The total profit or loss of a company after all revenues, costs, and expenses have been deducted, often referred to as the bottom line.

Earnings Per Share

A financial metric that shows the portion of a company's profit allocated to each outstanding share of common stock.