From the net tax function: T = t₀ + t₁Y,where t₀ 0,it follows that,as income rises

Question

From the net tax function: T = t₀ + t₁Y,where t₀ < 0 and t₁ > 0,it follows that,as income rises

Quizplus · Accepted Answer

The given net tax function shows that as income (Y) rises, the first term (t₀) decreases (since t₀ < 0). This implies that the average taxes (T/Y) decrease as income rises. Additionally, the second term (t₁Y) increases (since t₁ > 0), which means that the deficit (government spending - net tax revenue) declines as income rises. Therefore, option C is correct: average taxes falls and the deficit declines.

From the Net Tax Function: T = T0 + T1Y,where

From the Net Tax Function: T = T₀ + T₁Y,where