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Homer Earns $10,000 Per Year

Question 152

Multiple Choice

Homer earns $10,000 per year. Each year he spends $5,000 and saves $5,000. He pays a 5 percent sales tax on all of his spending. Assuming the sales tax is the only tax he pays, his average tax rate out of his income is


A) 0 percent.
B) 2.5 percent.
C) 3.5 percent.
D) 5.0 percent.

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