Which of the Following Explains One Difference Between a Consumption

question 92

Multiple Choice

Which of the following explains one difference between a consumption tax and an income tax?

• A)An income tax is a regressive tax; a consumption tax is a progressive tax.
• B)Under a consumption tax,households pay taxes only on the part of income they spend; under an income tax,households pay taxes on all income earned.
• C)Under an income tax,present consumption is taxed more heavily than future consumption; under a consumption tax,future consumption is taxed more heavily than present consumption.
• D)Savings are taxed more heavily under a consumption tax than under an income tax.

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Definitions:

Monetary Policy

The process by which a central bank or monetary authority manages money supply and interest rates to achieve macroeconomic objectives like controlling inflation, consumption, growth, and liquidity.

Deregulation

Deregulation is the process of removing or reducing government restrictions and regulations in industries to encourage more competition and efficiency.

Regulatory Capture

A situation where regulatory agencies are dominated by the very industries they are charged with regulating, leading to favorable outcomes for the industry.

Regulatory Agency

An agency, commission, or board established by the federal government or a state government to control the prices charged and the services offered by a natural monopoly or public utility.