The more progressive the tax system, the
A) less is the built-in stability for the economy.
B) greater is the built-in stability for the economy.
C) less is the effect of crowding out on the economy.
D) greater is the severity of business ﬂuctuations on the economy.

Question

Quizplus · Accepted Answer

A progressive tax system, where higher earners are taxed at a higher rate, leads to a more equal distribution of income and wealth. This reduces income inequality and increases purchasing power for lower income households, which can lead to greater economic stability as these households are more likely to spend their additional income on goods and services. Therefore, a more progressive tax system results in a greater built-in stability for the economy.

The More Progressive the Tax System, the