Question 27 (15 points) In the town of Fantastica, each resident's consumption spending is C - 8000+ 0.97, where Y is the resident's income. The only tax in Fantastica is a sales tax equal to 30% of consumption spending. a. Falkor's income is Y - 20,000. Calculate Falkor's average tax rate and his marginal tax rate. b. Artax's income is Y = 60,000. Calculate Artax's average tax rate and his marginal tax rate. c. Is the tax system in Fantastica progressive, regressive or flat? Explain briefly. d. Explain why taxing consumption rather than income reduces distortion in investment decisions. e. (Extra credit) Explain why taxing consumption rather than income can stimulate economic growth 4 5 6 7 00 ER TY D F G H J