To reduce a budget deficit, the government proposes raising tax rates. Assumption I: The existing tax…
The proposal relies on an expected increase in net revenue that can help reduce the deficit. It does not require the existing rate to be very low.
Choose your answer
To reduce a budget deficit, the government proposes raising tax rates. Assumption I: The existing tax rate is very low. Assumption II: The change is expected to increase net tax revenue sufficiently to help reduce the deficit. Which assumption is implicit?
Answer and explanation
Correct answer B
The proposal relies on an expected increase in net revenue that can help reduce the deficit. It does not require the existing rate to be very low.
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