When comparing households at different income levels, economists find that consumption spending grows more slowly than income.

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When comparing households at different income levels, economists find that consumption spending grows more slowly than income. Assume that when income grows by 50%, from $10,000 to $15,000, consumption grows by 25%, from $8,000 to $10,000. Compare the percent of income paid in taxes by a family with $15,000 in income to that paid by a family with $10,000 in income under a 1% tax on consumption purchases. Is this a proportional, progressive, or regressive tax?

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Macroeconomics

ISBN: 9781319098759

5th Edition

Authors: Paul Krugman, Robin Wells

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