Suppose that the government collected taxes in the following fashion: people who earn less than $50,000 pay 25 percent in taxes, people who earn between $50,000 and $100,000 pay 35 percent in taxes, people who earn between $100,000 and $200,000 pay 30 percent in taxes, and people who earn more than $200,000 pay 28 percent in taxes. Which of the following statements is correct?
a. The tax system is proportional for income levels less than $50,000 and regressive for income levels above $50,000.
b. The tax system is regressive for income levels less than $100,000 and progressive for income levels above $100,000.
c. The tax system is progressive for income levels less than $100,000 and regressive for income levels above $100,000.
d. The tax system is progressive for income levels less than $50,000 and proportional for income levels above $100,000.
c
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What will be an ideal response?
All of the following make the use of fiscal policy less attractive EXCEPT
A) that it cannot be effective unless it is accommodated with expansionary monetary policy. B) the substantial margin of error in the value of the multiplier. C) the legislative lag, which is the time it takes for Congress and the President to pass and implement the measure. D) the crowding out effect, which is the decrease in private spending that occurs due to increased government spending.