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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.

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Answer:

Please see explanation

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%

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