Economics: Principles & Policy
Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Chapter 17, Problem 1DQ
To determine

Comment the statement regarding federal government tax.

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Explanation of Solution

The tax as a percentage of GDP is shown in the figure below:

Economics: Principles & Policy, Chapter 17, Problem 1DQ

The federal government tax increases according to the proportion of national income of the country. According to figure 1, the ratio of taxes to the percentage of GDP was constant for around 50 years. While comparing with the industrialized countries, the taxation level in the country is low. Thus, there is no evidence to prove that the existing tax rates will ruin the economy.

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