Tax Policy
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AP Macroeconomics › Tax Policy
If the income level in a given economy increases by $100 and spending increases by $80, the marginal propensity to save in that economy is equal to which of the following?
0.2
0.8
0.75
0.5
Explanation
The marginal propensity to consume is calcuated by the change in consumption over the change in income. In this example, the marginal propensity to consume is 80/100 = 0.8. However, the problem asks for the marginal propensity to save and not the marginal propensity to consume.
In any economy, whatever money is not used for consumption is considered savings. Therefore, to find the marginal propensity to save, subtract the marginal propensity to consume from 1. Thus, 1 - 0.8 = 0.2. The marginal propensity to consume in this problem would be 0.2.
If the income level in a given economy increases by $100 and spending increases by $80, the marginal propensity to save in that economy is equal to which of the following?
0.2
0.8
0.75
0.5
Explanation
The marginal propensity to consume is calcuated by the change in consumption over the change in income. In this example, the marginal propensity to consume is 80/100 = 0.8. However, the problem asks for the marginal propensity to save and not the marginal propensity to consume.
In any economy, whatever money is not used for consumption is considered savings. Therefore, to find the marginal propensity to save, subtract the marginal propensity to consume from 1. Thus, 1 - 0.8 = 0.2. The marginal propensity to consume in this problem would be 0.2.
If the income level in a given economy increases by $100 and spending increases by $80, the marginal propensity to save in that economy is equal to which of the following?
0.2
0.8
0.75
0.5
Explanation
The marginal propensity to consume is calcuated by the change in consumption over the change in income. In this example, the marginal propensity to consume is 80/100 = 0.8. However, the problem asks for the marginal propensity to save and not the marginal propensity to consume.
In any economy, whatever money is not used for consumption is considered savings. Therefore, to find the marginal propensity to save, subtract the marginal propensity to consume from 1. Thus, 1 - 0.8 = 0.2. The marginal propensity to consume in this problem would be 0.2.
A tax credit describes an element of tax policy that .
reduces taxes for people who qualify under certain circumstances
raises money on investment income
only allows exemptions for people making under a certain income level per year
allows for an additional tax on goods deemed unseemly
allows for an additional tax on specific kinds of income, such as gambling
Explanation
Tax law includes small exemptions and refunds, which are known as tax credits. Often, these tax credits are provided for groups of people like homebuyers, parents, and students. Tax credits are also usually seen as a way to lighten specific tax burdens without rewriting or transforming tax policy.
A tax credit describes an element of tax policy that .
reduces taxes for people who qualify under certain circumstances
raises money on investment income
only allows exemptions for people making under a certain income level per year
allows for an additional tax on goods deemed unseemly
allows for an additional tax on specific kinds of income, such as gambling
Explanation
Tax law includes small exemptions and refunds, which are known as tax credits. Often, these tax credits are provided for groups of people like homebuyers, parents, and students. Tax credits are also usually seen as a way to lighten specific tax burdens without rewriting or transforming tax policy.
A tax credit describes an element of tax policy that .
reduces taxes for people who qualify under certain circumstances
raises money on investment income
only allows exemptions for people making under a certain income level per year
allows for an additional tax on goods deemed unseemly
allows for an additional tax on specific kinds of income, such as gambling
Explanation
Tax law includes small exemptions and refunds, which are known as tax credits. Often, these tax credits are provided for groups of people like homebuyers, parents, and students. Tax credits are also usually seen as a way to lighten specific tax burdens without rewriting or transforming tax policy.
In order, the four phases of the business cycle are:
expansion, peak, contraction, and trough
expansion, contraction, peak, and trough
contraction, expansion, peak, and trough
peak, contraction, expansion, and trough
Explanation
The four phases of the business cycle are expansion, peak, contraction, and trough. Real GDP growth is positive during an expansion, followed by a point at which real GDP growth peaks, then begins to decline during a contraction, and finally a bottoming out at the point of the trough. Each of the other answer choices represents a distortion of this order.
In order, the four phases of the business cycle are:
expansion, peak, contraction, and trough
expansion, contraction, peak, and trough
contraction, expansion, peak, and trough
peak, contraction, expansion, and trough
Explanation
The four phases of the business cycle are expansion, peak, contraction, and trough. Real GDP growth is positive during an expansion, followed by a point at which real GDP growth peaks, then begins to decline during a contraction, and finally a bottoming out at the point of the trough. Each of the other answer choices represents a distortion of this order.
In order, the four phases of the business cycle are:
expansion, peak, contraction, and trough
expansion, contraction, peak, and trough
contraction, expansion, peak, and trough
peak, contraction, expansion, and trough
Explanation
The four phases of the business cycle are expansion, peak, contraction, and trough. Real GDP growth is positive during an expansion, followed by a point at which real GDP growth peaks, then begins to decline during a contraction, and finally a bottoming out at the point of the trough. Each of the other answer choices represents a distortion of this order.
A progressive tax structure is designed in order to put more of the tax burden on .
wealthier individuals instead of poorer individuals
corporate profits instead of individual income
sales tax instead of income tax
poorer individuals instead of wealthier individuals
individual income instead of corporate profits
Explanation
A progressive tax system is so-called because, as a person or corporation makes more money, the overall tax burden as a percent of income gets progressively higher. A progressive tax seeks to produce more government revenue from those individuals who are perceived as being more able to bear the burden. Progressive taxation is usually popular politically, making it such a widespread form of taxation.