income tax and income vary directly or inversely??
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Answers
The demand for money depends on three main factors: national income, the price level and the rate of interest. Transactions demand and precautionary demand vary directly with the first two factors but speculative demand for money vary inversely with the market rate of interest.
Aggregate demand in Keynesian analysis :
#Aggregate demand is the sum of four components: consumption, investment, government spending, and net exports.
#Consumption can change for a number of reasons, including movements in income, taxes, expectations about future income, and changes in wealth levels.
Explanation:
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The removal of what elements of the tax structure would increase the national income compared to what that income would be if those elements remained?
The removal of some of the retarding elements is likely, however, to decrease the total revenue produced by the tax system, even though it increases the national income. The question, to be meaningful, must therefore specify whether any such decrease is to be made up from non-tax sources such as borrowing, or instead from tax sources.
In this analysis the latter assumption will be made; the inquiry is thus confined to tax matters, leaving the question of taxes versus borrowing and other similar inquiries for other analyses. If it were assumed that revenue losses were to be covered by borrowing, it might be found that the influence of substituting borrowing for taxation would overshadow the influence of differences among the several tax elements. The assumption that revenue losses are to be made up from taxation is thus the more fruitful for present purposes, although it is also the more detailed, since it requires that the answer state not only what element is being eliminated, but what element is being used as a revenue substitute. An exception to this requirement will occur in the few cases where the total revenue of the system will not decrease even if there is no replacement. This may occur either (a) because the element being eliminated yields no revenue (e.g., a prohibitive import duty), or (b) because the yield of the rest of the system is increased sufficiently as a result of the increase in national income.