Trying to Achieve Vertical Equity by Using a Progressive Income

question 41

Multiple Choice

Trying to achieve vertical equity by using a progressive income tax structure can create problems with which of the following?

• A) horizontal equity
• B) vertical equity
• C) benefits received
• D) tax incidence
• E) regressive equality

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Definitions:

Complementarity

A relationship between two goods where the use of one increases the value or demand for the other.

Equilibrium Price

The market price at which the quantity of goods supplied is equal to the quantity of goods demanded, also known as the market-clearing price.

Supply and Demand Functions

Mathematical expressions that describe the relationship between the supply of and demand for goods or services within a market.

Pareto Optimal

A distribution of resources from which it is impossible to reallocate in a way that makes at least one individual better off without making anyone worse off; it constitutes an efficient allocation of resources.