In a regressive tax system ?
Correct answer: C. The average rate of tax falls as income increase
- A. The amount of tax paid increase with income
- B. The marginal rate of tax decrease with more income
- C. The average rate of tax falls as income increase
- D. The average rate of tax is constant as income increases
Explanation
A regressive tax takes a smaller percentage of income as income rises, so its average tax rate falls with income. The total amount paid may still rise, which is why option a is not the defining feature.
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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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