Being penalized for earning a higher dollar amount even though your purchasing power hasn't changed is known as:
A) tax distortion.
B) shoe-leather costs.
C) menu costs.
D) the velocity of inflation.

Question

Quizplus · Accepted Answer

Tax distortion occurs when an individual's tax liability increases as their nominal income increases, even if their real income and purchasing power remain the same. This can create disincentives to work harder or earn more, leading to inefficiencies in the economy.

Being Penalized for Earning a Higher Dollar Amount Even Though