If Taxes Became More Progressive, We Would Expect That Whenever

question 11

Multiple Choice

If taxes became more progressive, we would expect that whenever there was an economic fluctuation

• A)there would be no difference in how automatic changes in taxes affected spending.
• B)automatic changes in taxes would become less stabilizing.
• C)discretionary fiscal policy would become more effective.
• D)automatic changes in taxes would become more stabilizing.
• E)discretionary fiscal policy would become less effective.

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Definitions:

Marginal Utility

Marginal utility is the additional satisfaction or benefit gained from consuming one more unit of a good or service, which tends to decrease as more units are consumed.

Individual Demand

This refers to the quantity of a good or service that a single consumer is willing and able to purchase at various prices, holding other factors constant.

Normal Good

A type of good for which demand increases when income increases, and falls when income decreases, but price remains constant.

Inferior Good

A type of good for which demand decreases as the income of individuals or the economy increases, opposite to what is observed with a normal good.