Which of the Following Statements About a Consumption Tax Is

question 1

Multiple Choice

Which of the following statements about a consumption tax is false?

• A) Compared to an income tax, a consumption tax would necessarily produce lower revenues for the government in a given year because the portion of income saved is not taxed.
• B) A consumption tax encourages saving, which when invested could lead to increased economic activity.
• C) Under a consumption tax, current consumption is taxed at a lower rate than future consumption
• D) A consumption tax could favor high-income individuals who are likely to save more than low-income individuals.

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Definitions:

Mental Activity

The operation of the mind through processes like thinking, learning, memory, perception, and problem-solving.

Goods

Tangible items that are produced, bought, or sold, serving as objects of commerce and economic transactions.

Services

Activities or functions that are provided by individuals or organizations to fulfill the needs or wants of others.

Offshoring

Sending work or jobs to another country to cut a company’s costs at home (sometimes called international outsourcing and offshore outsourcing).