The appropriate tax rate to consider gauging how much the tax system distorts incentives and decision making is the ?
Correct answer: C. marginal tax rate
- A. Proportional tax rate
- B. average tax rate
- C. marginal tax rate
- D. vertical tax rate
- E. horizontal tax rate
Explanation
The marginal tax rate applies to the next dollar earned, so it directly affects decisions about working, saving, and investing. The average tax rate measures the overall tax burden but not the incentive at the margin.
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
A tax system is regarded as horizontally equitable if ?
A tax on petrol is likely to ?
Since the supply of undeveloped land is relatively inelastic a tax on undeveloped land would generate ?
The ability-to-pay principle of taxation suggests that if a tax system is to be vertically equitable it should be ?
The average tax rate is ?
A tax for which high income taxpayers pay a smaller fraction of their income than do low income taxpayers is known as ?