Consider Three Imaginary Countries

question 14

Multiple Choice

Consider three imaginary countries.In Aire,saving amounts to $4,000 and consumption amounts to $12,000;in Bovina,saving amounts to $3,000 and consumption amounts to $24,000;and in Cartar,saving amounts to $10,000 and consumption amounts to $50,000.The saving rate is

• A)higher in Aire than in Cartar,and it is higher in Cartar than in Bovina.
• B)higher in Cartar than in Aire,and it is higher in Aire than in Bovina.
• C)higher in Cartar than in Bovina,and it is the same in Bovina and Aire.
• D)higher in Aire than in Bovina,and it is the same in Aire and Cartar.

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Definitions:

Proportional Income Tax

A taxation system where the tax rate remains constant regardless of the amount of income.

Average Tax Rate

The percentage representation of total taxes paid in relation to the overall taxable income or expenditure.

Marginal Tax Rate

The rate at which the last dollar of income is taxed, influencing decisions about whether to engage in activities that will produce additional income.

Tax Liability

The total amount of tax that an individual or entity is legally obligated to pay to a tax authority.