A marginal tax rate is the tax paid on:
Correct answer: C. An additional unit of taxable income
- A. The taxpayer's total annual income
- B. The taxpayer's average annual income
- C. An additional unit of taxable income
- D. The taxpayer's total accumulated wealth
Explanation
The marginal tax rate applies to the next unit of income earned. It can differ from the average tax rate, which measures total tax paid as a proportion of total income.
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About Public Finance
Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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