economic growth over the past decade in the country Tarragon has been very low.
ID: 1205124 • Letter: E
Question
economic growth over the past decade in the country Tarragon has been very low. As a result the unemployment level has remained high. While discussing possible measures to improve the situation, Jane Watson, an associate at a leading research institute says that government should lower personal income tax rates. This she believes will induce people t work more which in turn will rise output. Martina Allen, an editor of a reputed newspaper, disagrees. According to her the income tax rates in Tarragon are not very high and are in fact similar to comparable countries. In her opinion, the government should lower the cooperate tax rates to encourage investments by firms. Which of the following is most strongly implied by the information given in the question? A.Jane believes that the income effect of a personal income tax cut is weaker than the substitution effect. B. the number of discouraged workers in Tarragon is high. C. corporate tax rates in Tarragon are very high. D. Tax reduction is the only fiscal policy measure that can boost economic growth in an economy that has stagnated for almost a decade. E. Marthina thinks that revenues from personal income taxes in Tarragon are more or less equal to revenues generated in comparable countries.
Explanation / Answer
The Economic Growth in Tarragon is Low,and the unemployment level is High.In the Given Case,if the Government is about to decrease the personal income tax rates then the possibility is that it will induce people to work more which in turn will rise output.But,if the corporates are not coming forward to make investment then the country may not generate,what is required,which is generation of employment.If government is lowering the cooperate tax rates to encourage investments then,the possibility is the Firms may come forward to make a investment in the country and the people may have employment.
corporate tax rates in Tarragon are very high for which the companies are facing problems to invest.If corporate taxes are reduces then the firm may have good opportunities to invest.
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