Question

Suppose that your state raises its sales tax from 5 percent to 6 percent. The state revenue commissioner forecasts a 20 percent increase in sales tax revenue. Is this plausible? Explain.

Answer 1

Please see explanation

Step-by-step explanation:

The forecast of 20% increase prepared by the state revenue commissioner is plausible because the new sales tax rate has also been increased by 20% in comparison with the old tax rate which can be calculated as follows:

Change in sales tax rate=change in tax rate/old tax rate

=6-5/5

=1/5

=20%