Using the Graph Drawn Above, What Could Occur If

question 105

Essay

Using the graph drawn above, what could occur if:
i) a government that advocates a flat tax rate to the income distribution.
ii) a government advocates a proportional tax where there are more tax brackets.

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Definitions:

Amortized Historical Cost

The accounting method of gradually writing off the initial cost of an asset over a period, adjusting for depreciation or amortization.

Market Value

The present listed price for purchasing or selling an asset or service in a market.

Fair Value Hedge

A specific hedging strategy used to mitigate the risk of changes in the fair value of an asset or liability or an unrecognized firm commitment.

Hedge Accounting

An accounting method that records the offsetting positions of a financial hedge and its underlying asset together to reduce volatility in financial statements.