Norway has a lower tax on dividend and interest income than does United Kingdom. We would expect Norway to have a _ tax wedge and a _ growth rate of real GDP.

Question

Quizplus · Accepted Answer

When a country has a smaller tax wedge (the difference between the pre-tax and post-tax income), individuals have more incentive to work, save and invest. This leads to a higher growth rate of real GDP. Therefore, Norway's lower tax on dividend and interest income compared to the United Kingdom would result in a smaller tax wedge and a faster growth rate of real GDP.

Norway Has a Lower Tax on Dividend and Interest Income