Why are income taxes on capital income more powerful than those on labour income? Taxes on capital income more powerful than those on labour income because they A. increase the after-tax real interest rate B. increase saving and investment, which speeds the growth rate of real GDP ○ C. decrease the before-tax real interest rate D. decrease saving and investment, which slows the growth rate of real GDP Also, taxes on capital income are more powerful than those on labour income because they are levied on the which makes them OA. nominal interest rate; low when the inflation rate is high B. nominal interest rate; high as a percentage of the real interest rate OC. real interest rate; high when the inflation rate is low ○ D. real interest rate; high as a percentage of the nominal interest rate To see how inflation raises the true tax rate on capital income, suppose the real interest rate is 4.00 percent a year, the tax rate is 30.0 percent, and the inflation rate is 4.00 percent a year. What is the real after-tax interest rate? And what is the true tax rate? The real after-tax interest rate is ☐ percent a year, and the true tax rate is percent.

Why are income taxes on capital income more powerful than those on labour income? Taxes on capital income more powerful than those on labour income because they A. increase the after-tax real interest rate B. increase saving and investment, which speeds the growth rate of real GDP ○ C. decrease the before-tax real interest rate D. decrease saving and investment, which slows the growth rate of real GDP Also, taxes on capital income are more powerful than those on labour income because they are levied on the which makes them OA. nominal interest rate; low when the inflation rate is high B. nominal interest rate; high as a percentage of the real interest rate OC. real interest rate; high when the inflation rate is low ○ D. real interest rate; high as a percentage of the nominal interest rate To see how inflation raises the true tax rate on capital income, suppose the real interest rate is 4.00 percent a year, the tax rate is 30.0 percent, and the inflation rate is 4.00 percent a year. What is the real after-tax interest rate? And what is the true tax rate? The real after-tax interest rate is ☐ percent a year, and the true tax rate is percent.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Public Saving

Public saving deals with the amount which has been in excess after meeting all the obligatory expenses and investment of the government. Taxes are collected by the government to meet its day-to-day expenditures. The obligatory expenses include all those expenses which are mandatory for the government. It cannot be avoided as it is inevitable.

Question

Why are income taxes on capital income more powerful than those on labour income?
Taxes on capital income more powerful than those on labour income because they
A. increase the after-tax real interest rate
B. increase saving and investment, which speeds the growth rate of real GDP
C. decrease the before-tax real interest rate
D. decrease saving and investment, which slows the growth rate of real GDP
Also, taxes on capital income are more powerful than those on labour income because they are levied on the
which makes them
A. nominal interest rate; low when the inflation rate is high
B. nominal interest rate; high as a percentage of the real interest rate
C. real interest rate; high when the inflation rate is low
D. real interest rate; high as a percentage of the nominal interest rate
To see how inflation raises the true tax rate on capital income, suppose the real interest rate is 4.00 percent a year, the
tax rate is 30.0 percent, and the inflation rate is 4.00 percent a year.
What is the real after-tax interest rate? And what is the true tax rate?
The real after-tax interest rate is ☐ percent a year, and the true tax rate is
percent.

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