Question

why would the government decide to increase taxes on people with the highest income. (This in...

why would the government decide to increase taxes on people with the highest income. (This in the classical model in a closed economy.)

Homework Answers

Answer #1

Ans. In proportional taxation meachanism the taxing authority charges the same tax amount from all the taxpayers irrespective of income . this caused inequility in the economy both poor and rich had to pay equal amount of taxes, poor were becoming poorer and rich were becoming richer thats why government decided to change taxation system into progressive one where the taxpayer has to pay their tax share according to their income level. The highest income level people have to pay highest percentage of tax and vica versa.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Explain why a decrease in income taxes would not necessarily increase the riskiness of investments people...
Explain why a decrease in income taxes would not necessarily increase the riskiness of investments people are willing to undertake.
Assume that the economy is closed. In the Classical model, a decrease in taxes will: a....
Assume that the economy is closed. In the Classical model, a decrease in taxes will: a. increase both public saving and private saving. b. increase public saving and decrease private saving. c. decrease public saving and increase private saving. d. decrease both public saving and private saving.
In the classical model, what is the effect of an increase in government spending that is...
In the classical model, what is the effect of an increase in government spending that is not financed by an increase in taxes (an increase in the deficit)? How do prices, real GDP, consumption, saving, investment spending, and real interest rates change as a result of the increase in government spending? Explain and show graphically. (Hint: Use the market for loanable funds model.)
Question 1: A bond-financed increase in government spending in the classical model would cause both real...
Question 1: A bond-financed increase in government spending in the classical model would cause both real output and the interest rate to rise. Is this true or false? Explain your answer.
In the United States people pay many types of taxes. Income tax is an example of...
In the United States people pay many types of taxes. Income tax is an example of a regressive tax which increases as a person’s income rises. True, the percentage of income paid increases as people earn higher wages. False, income taxes are progressive which is why they increase as income rises. False, as income increases, the proportion of tax falls and the wealthy pay less taxes than the poor. True, regressive taxes are the most common type of taxes in...
Calculations: If there a $2billion increase in government spending, other things being equal, what would be...
Calculations: If there a $2billion increase in government spending, other things being equal, what would be the resulting change in aggregate demand, and how much of the change would a change in consumption, if the MPC were the following: 1/3? 1/2? 2/3? 3/4? 4/5? The economy is experiencing a $225 million inflationary gap. If the government decided to solve this macroeconomic disequilibrium using a change in taxes, would you recommend an increase or decrease in taxes? If the MPC =0.9,...
The government raises income taxes. How might this impact the economy from a microeconomic & macroeconomic...
The government raises income taxes. How might this impact the economy from a microeconomic & macroeconomic perspective?   
Why does a reduction in taxes have a smaller multiplier effect than an increase in government...
Why does a reduction in taxes have a smaller multiplier effect than an increase in government spending of an equal amount? Tucker, Irvin B.. Macroeconomics for Today (Page 323). South-Western College Pub. Kindle Edition.
In a closed economy what if people choose to save some of their incomes, explain why...
In a closed economy what if people choose to save some of their incomes, explain why even with that assumption, it is still expected that GNE = GDP = GNI. (Hint: think about what Classical Economics says about leakages and injections)
According to the balanced budget multiplier, an increase in government spending of $10,000 that is financed...
According to the balanced budget multiplier, an increase in government spending of $10,000 that is financed by an increase of $10,000 in taxes will have what effect on the economy when MPC is 0.80? a) Income will not change. b) Income will increase by $8,000. c) Income will increase by $50,000. d) Income will increase by $10,000.