Table 18-3
Table 18-3 contains data on household spending at different income levels.Suppose that a 3 percent tax is levied on all consumption spending.
-Refer to Table 18-3.Calculate the percent of income paid in taxes by a family with $20,000 income and by a family with $24,000 income.
A)The family with a $20,000 income pays 2.7 percent of its income in consumption taxes and the family with a $24,000 income pays 2.6 percent of its income in consumption taxes.
B)Each family pays 3 percent of their respective incomes in consumption taxes.
C)The family with a $20,000 income pays 15 percent of its income in consumption taxes and the family with a $24,000 income pays 33.3 percent of its income in consumption taxes.
D)There is insufficient information to make these calculations.

Question

Table 18-3
  Table 18-3 contains data on household spending at different income levels.Suppose that a 3 percent tax is levied on all consumption spending.
-Refer to Table 18-3.Calculate the percent of income paid in taxes by a family with $20,000 income and by a family with $24,000 income.
A)The family with a $20,000 income pays 2.7 percent of its income in consumption taxes and the family with a $24,000 income pays 2.6 percent of its income in consumption taxes. 
B)Each family pays 3 percent of their respective incomes in consumption taxes. 
C)The family with a $20,000 income pays 15 percent of its income in consumption taxes and the family with a $24,000 income pays 33.3 percent of its income in consumption taxes. 
D)There is insufficient information to make these calculations.

Quizplus · Accepted Answer

To calculate the percent of income paid in taxes, we need to multiply the consumption spending by 3 percent and divide by the income.

For the family with $20,000 income:
Taxes paid = 0.03 x $16,000 = $480
Percent of income paid in taxes = ($480/$20,000) x 100% = 2.4%

For the family with $24,000 income:
Taxes paid = 0.03 x $20,000 = $600
Percent of income paid in taxes = ($600/$24,000) x 100% = 2.5%

Therefore, the correct answer is A.

Table 18-3 Table 18-3 Contains Data on Household Spending at Spending