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JAMB Economics 2003 Question 38

Question 38

Public Finance

The effect of an increase in the personal income tax is to

  1. A.reduce unemployment
  2. B.raise the absolute price level
  3. C.reduce the disposable income
  4. D.distort the economy
Show the answer and explanation

Answer: C (reduce the disposable income)

Explanation

Disposable income is income after tax, so a higher income tax leaves people with less to spend.