AP Macroeconomics : Tax Credits

Study concepts, example questions & explanations for AP Macroeconomics

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Example Questions

Example Question #2 : Tax Policy

A tax credit describes an element of tax policy that ________.

Possible Answers:

allows for an additional tax on specific kinds of income, such as gambling

reduces taxes for people who qualify under certain circumstances

raises money on investment income

allows for an additional tax on goods deemed unseemly

only allows exemptions for people making under a certain income level per year

Correct answer:

reduces taxes for people who qualify under certain circumstances

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.

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