A tax system is proportional when the average tax rate:
Correct answer: C. Remains constant as income increases
- A. Rises as taxable income increases
- B. Falls as taxable income increases
- C. Remains constant as income increases
- D. Becomes zero above a threshold
Explanation
Under proportional taxation, taxpayers pay the same percentage of income at different income levels. A rising average rate indicates progressive taxation, while a falling rate indicates regressive taxation.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
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.
Practise Public Finance
406 free Public Finance MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Economics questions like this
Economics is on 2 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Public Finance questions
According to Wagner's law, economic development generally tends to cause:
Which statement best describes the difference between a capital expenditure and a current expenditure?
When a government finances a deficit by creating new money, the most immediate macroeconomic concern is:
Public debt owed to foreign governments, international institutions or overseas lenders is called:
The Laffer curve illustrates the relationship between:
Which budgeting method requires each expenditure programme to be justified from the beginning of every budget cycle?