Assume That in Year 1 Your Average Tax Rate Is

question 58

Multiple Choice

Assume that in year 1 your average tax rate is 20 percent on a taxable income of $20,000.If the marginal tax rate on the next $10,000 of taxable income is 30 percent,what will be the average tax rate if your taxable income rises to $30,000?

• A) 7 percent.
• B) 30 percent.
• C) About 16 percent.
• D) About 23 percent.

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Definitions:

Empirical Measure

A quantitative determination obtained through observation and experimentation rather than theory.

Variable

A measure that can change from time to time or from observation to observation.

Causality

Describes a relationship where one event (the cause) directly affects the outcome of another event (the effect).

Normative Question

Involves value judgments about what ought to be and discusses what should be done based on subjective criteria.