Question

The average after - tax income for a household was 2.5% higher in 1983 than in 1982. At the same time, average after - tax income declined per households at the lower and middle income levels.
Which of the following can be most reasonably inferred from the information above?

• A. There were more households overall in 1983 than in 1982.
• B. There were fewer households at the upper income level in 1983 than in 1982.
• C. Total after - tax income for all households at the lower and the middle income levels was higher in 1983 than in 1982.
• D. Average after - tax income for the households at the upper income level rose by more than 2.5% between 1982 and 1983

Answer 1

The correct option is D Average after - tax income for the households at the upper income level rose by more than 2.5% between 1982 and 1983

It is given that, in 1983 average income after tax rose compared to the same in 1982. But it is also given that, the average income after tax for low and medium income fell. Then it can be easily inferred that, the rise in average income after taxation was primarily caused by the income increase in the high threshold areas or the high income areas. This is given in option (d)