Which of the following is true of net taxes?
A)The level of net taxes varies directly with the level of transfer payments.
B)The level of net taxes varies inversely with the level of transfer payments.
C)Net taxes must always be less than zero.
D)Net taxes increase when income tax rates are reduced.
E)Net taxes increase when income decreases.

Question

Quizplus · Accepted Answer

Net taxes (taxes paid to the government minus transfer payments received from the government) vary inversely with the level of transfer payments. As transfer payments increase, net taxes decrease, assuming the level of taxes paid remains constant.

Which of the Following Is True of Net Taxes