1. In a progressive tax structure… the marginal tax rate exceeds the average tax
ID: 1167588 • Letter: 1
Question
1. In a progressive tax structure…
the marginal tax rate exceeds the average tax rate for all but the first category or bracket.
taxes do not change the gap between upper and lower income groups.
the average tax rate rises as income falls.
all the choices are correct.
2. You earn $40,000 and your income tax is $6,000. When you get a raise to $50,000 your income tax rises to $8,000. Which of the following is true?
Your average tax rate was 15% at $40,000.
Your marginal tax rate between these two incomes was 20%.
Your average tax rate is 16% at $50,000.
All of the above
3. If Person A earns a salary of $40,000 and Person B earns a salary of $800,000:
Person A will pay the same Medicare tax rate as person B.
Person A will pay a larger Medicare tax rate than person B.
Person A will pay a smaller Medicare tax rate than person B.
The relative Medicare tax rate depends on their exemptions and withholdings.
4. Net exports is a positive figure when
a nation's exports of goods and services exceed its imports
depreciation exceeds gross private domestic investment
the economy's stock of capital is declining
a nation's imports of goods and services exceed its exports
Person A will pay the same Medicare tax rate as person B.
Person A will pay a larger Medicare tax rate than person B.
Explanation / Answer
(1)
Only the 1st option is correct.
Rest are incorrect statements.
(2)
When income = $40,000, average tax rate = 6,000 / 40,000 = 15%
When income = $50,000, average tax rate = 8,000 / 450,000 = 16%
Marginal tax rate = change in tax / change in income = 2,000 / 10,000 = 20%
So, all the statements are correct.
(3)
The 1st statement is correct.
The medicare tax rate is 1.45% for all income levels.
(4)
Only the 1st statement is correct.
Net exports is defined as Explorts minus Imports, so it is positive when Exports is greater than imports.
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