Taxation

Question 1

What is a progressive tax system?

Answer 1

As income rises a larger percentage of income is paid in tax.

Question 2

What regressive tax system?

Answer 2

As income rises a smaller percentage of income is paid in tax.

Question 3

What is proportional tax?

Answer 3

The percentage of income paid in tax is constant

Question 4

What are the effects of tax rate change?

Answer 4

Incentive to work
Tax revenues
Income distribution
Real output and employment
Average price level
The trade balance
Flows for foreign direct investment