Question

In: Economics

Because the income tax structure is progressive, the amount of taxes paid is a _____. a....

Because the income tax structure is progressive, the amount of taxes paid is a _____. a. smaller fraction of income in expansions than in contractions b. decreasing function of income in both expansions and contractions c. larger fraction of income in expansions than in contractions d. constant fraction of income throughout the business cycle e. constant amount at all levels of output and income

Solutions

Expert Solution

The correct option is (C) ''The larger fraction of income in expansions than in contractions''

The progressive tax rate boosts as the earnings boost so the greater the earnings the greater the taxes however it increases by the action function so the larger fraction of income in expansions than in contractions as the earnings increases in the growth and reduces in the contraction.

Rahul Sunny answered 2 years ago
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