Question

The growth rate of? Zerbia, a small developing? country, has fallen close to zero percent in the current year. Harry Miller and Jonathan? Taylor, who are columnists with a business? daily, are discussing suitable fiscal measures to revive economic growth in the country. Jonathan feels that the income tax rates in Zerbia are too high. Lower income tax rates would increase consumer spending and so would promote economic growth.? Harry, on the other? hand, believes that an increase in government expenditure would have a substantial impact on the? country's GDP.? Additionally, he feels that investing in green technology would not only accelerate? growth, it is also likely to be more sustainable in the long term.
Which of the? following, if? true, would suggest that lowering income tax rates may not be very effective in reviving growth in the near? term?

A. Income inequality in? Zerbia, as measured by the Gini? coefficient, has been calculated to be very high.

B. Market research suggests that the slowdown in the economy has considerably increased? people's propensity to save.

C. The average wage rate for skilled labor is lower in Zerbia compared to the other developing countries.

D. The? capital-output ratio in Zerbia is around 0.3.

E. The income tax rate in Zerbia rises with the level of taxable income.

Answer 1

Answer:E. The income tax rate in Zerbia rises with the level of taxable income

Explanation:

When the tax rate rise in proportion to the income tax it means a low income tax will bring in lower income and this fall contrary to the target achievement of increasing income by lowering the tax rate.

An inequality in salary will not adversary affect a reduction in Income tax to boost the economy as all workers will have more disposable income compare to the period before income tax rate. deduction.

An increase in propensity to save in an economic where income tax is reduced will help to increase savings and subsequently investment.

With a low wage for skilled workers the reduced income tax rate will help to increase disposable income.

The capital output will be utilized to improve output, with less income tax.