ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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it causes inflation
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it causes the lorenz curve to shift to the right
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low income people are less likely to have the benefit of a marginal tax cut
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None of the above
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Detailed explanation-1: -Imposition of taxes results in the reduction of disposable income of the taxpayers. This will reduce their expenditure on necessaries which are required to be consumed for the sake of improving efficiency. As efficiency suffers ability to work declines. This ultimately adversely affects savings and investment.
Detailed explanation-2: -Expenses that are allowed as deductions or credits for tax purposes may cause variances in these two documents. If a company is effectively utilizing tax deductions and credits, then its effective tax rate will be lower than a company that is not effectively using these strategies.
Detailed explanation-3: -Tax cuts reduce government revenues and create either a budget deficit or increased sovereign debt. Critics often argue that the tax cut benefits the rich at the expense of those with fewer resources as services beneficial to those in a lower income bracket are cut.
Detailed explanation-4: -Individual taxation Both cash benefits and income tax lead to an overall reduction in income inequality. Although richer households pay more in indirect taxes than poorer ones, they pay less as a proportion of their income. This means that indirect taxes can increase income inequality.