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.	decreasing function of income in both expansions and contractions
	b.	constant fraction of income throughout the business cycle
	c.	constant amount at all levels of output and income
	d.	smaller fraction of income in expansions than in contractions
	e.	larger fraction of income in expansions than in contractions

Solutions

Expert Solution

Option e

the larger fraction of income in expansions than in contractions

The progressive tax rate increases as the income increase so the higher the income the higher the taxes but it increases by the step function so the larger fraction of income in expansions than in contractions as the income increases in the expansion and decreases in the contraction.

Rahul Sunny answered 2 years ago

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