Asked by Carzetta Allen on Jun 19, 2024
Verified
The principle of neutrality states that, all else equal
A) taxes that are neutral with respect to economic decisions are generally preferable to taxes that distort economic decisions.
B) taxes that distort economic decisions are generally preferable to taxes that are neutral with respect to economic decisions.
C) taxes that are neutral with respect to economic decisions are equally preferable to taxes that distort economic decisions.
D) in the long run, all taxes are essentially neutral with respect to economic decisions.
Principle of Neutrality
In economic policy, it suggests that decision-making and interventions should not favor any particular market outcome or resource allocation.
Economic Decisions
Choices made by individuals, businesses, or governments regarding the allocation of resources and the distribution of goods and services.
- Understand the concept of tax neutrality and its effects on economic performance.
Verified Answer
TM
Tiffany MarieJun 19, 2024
Final Answer :
A
Explanation :
The principle of neutrality in taxation suggests that taxes should not influence economic decisions. Therefore, taxes that are neutral and do not distort economic decisions are generally considered preferable, as they allow the market to allocate resources more efficiently.
Learning Objectives
- Understand the concept of tax neutrality and its effects on economic performance.
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