In 2013, the Japanese Government adopted a range of policies, including monetary policy, to lift consumer spending and investment so as to avoid deflation. At the same time, some Japanese politicians were arguing that the government should raise the rate of the country’s sales tax from 5% to 10%. Sales tax is an indirect and regressive tax.
(a)[2]
Define the term ‘regressive tax’.
(b)[4]
Explain two influences on the amount firms spend on capital goods.
(c)[6]
Analyse how monetary policy could increase the price level.
(d)[8]
Discuss whether raising the rate of a sales tax would benefit an economy.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “A tax that takes a larger proportion of income from the poor” …