Briefly compare the three tax systems based on the relationship between the marginal tax rate and the average tax rate as income rises
What will be an ideal response?
The three tax systems are proportional, progressive, and regressive taxes. A proportional tax system is one in which the amount of taxes is proportional to income so that the marginal tax rate equals the average tax rate at all income levels. A progressive tax system is one in which a higher percentage of income is paid as taxes when income rises, so that the marginal tax rate is higher than the average tax rate when income rises. A regressive tax system is one in which a lower percentage of income is paid as taxes when income rises, so that the marginal tax rate is lower than the average tax rate when income rises.
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A firm that hires labor in a purely competitive resource market is a:
A. "Price maker" B. "Product taker" C. "Money maker" D. "Wage taker"
When recessions occur, advocates of small government should recommend
A. reductions in the number of federal employees. B. reductions in transfer payments. C. reductions in taxes. D. increases in transfer payments and government spending.