Economics (AS & A Level) · Feb / March 2024 · Paper 12 · Question 14

A country uses an income tax under which the first $10 000 of income is tax-free, the next $20 000 is taxed at 20% and any income over $30 000 is taxed at a top rate of 40%. It also levies a sales tax of 10% on most products. Which combination of tax changes is most likely to create a more equal distribution of income in the country?

1. Aa higher tax-free allowance; a higher rate of tax
2. Ba higher top rate of tax; a lower rate of tax
3. Ca lower tax-free allowance; a higher number of exempt goods
4. Da lower top rate of tax; a lower number of exempt goods

As printed in the paper