Between 2000 and 2005, Finland increased its tax on dividend (interest) income. As a result, the tax wedge and the growth rate of real GDP _ .

Question

Quizplus · Accepted Answer

Increasing tax on dividend income means an increase in the tax wedge, which reduces the incentive for individuals to invest in the stock market. This decreases the stock market value and reduces the amount of investment in the economy. This reduction in investment slows down the growth rate of real GDP.

Between 2000 and 2005, Finland Increased Its Tax on Dividend