STAYER ECO 450 W EEK 9 Q UIZ 7 C H 13 AND 14 C HECK THIS A+ TUTORIAL GUIDELINE AT HTTP :// WWW. ASSIGNMENTCLOUD. COM / ECO -450/ ECO WEEK -9- QUIZ -7- CH -13- AND -14 F OR MORE CLASSES VISIT HTTP :// WWW. ASSIGNMENTCLOUD. COM 1. T HE ACTUAL FEDERAL INCOME TAX CURRENTLY TAXES ALL INCOME IRRESPECTIVE OF ITS SOURCE OR USE AT THE SAME TAX RATE. 2. C OMPREHENSIVE INCOME EXCLUDES UNREALIZED CAPITAL GAINS. 3. U NDER A COMPREHENSIVE INCOME TAX, TRANSFER PAYMENTS RECEIVED BY S OCIAL S ECURITY RECIPIENTS WOULD BE FULLY TAXABLE. 4. H OMEOWNERS EARN RENTAL INCOME - IN - KIND FROM THEIR HOME THAT WOULD BE TAXABLE UNDER A COMPRE ­ HENSIVE INCOME TAX. 5. A COMPREHENSIVE INCOME TAX IS A LUMP - SUM TAX. 6. A COMPREHENSIVE INCOME TAX WILL RESULT IN A DIVERGENCE BETWEEN GROSS WAGES PAID BY EMPLOYERS AND NET WAGES RECEIVED BY WORKERS. 7. A COMPREHENSIVE INCOME TAX WILL ALWAYS REDUCE WORK EFFORT BY TAXPAYERS. HTTP :// WWW. ASSIGNMENTCLOUD. COM / ECO -450/ ECO WEEK -9- QUIZ -7- CH -13- AND -14 HTTP :// WWW. ASSIGNMENTCLOUD. COM

8. T HE SUBSTITUTION EFFECT OF A TAX - INDUCED DECLINE IN WAGES ALWAYS LEADS WORKERS TO WORK LESS. 9. T HE MARKET WAGE ELASTICITY OF LABOR IS ZERO. I F THIS IS THE CASE, THE EXCESS BURDEN OF A TAX ON LABOR INCOME WILL ALSO BE ZERO. 10. P OINTS ON A COMPENSATED LABOR SUPPLY CURVE ARE ALWAYS MORE ELASTIC THAN POINTS FOR CORRESPONDING WAGE LEVELS ON A REGULAR LABOR SUPPLY CURVE. 11. C OMPREHENSIVE INCOME IS THE SUM OF ANNUAL CONSUMPTION AND THE CHANGE IN NET WORTH. 12. A TAX ON INTEREST INCOME DOES NOT PREVENT CREDIT MARKET FROM EFFICIENTLY ALLOCATING RESOURCES. 13. I F AN INDIVIDUAL IS SUBJECT TO A 30- PERCENT INCOME TAX, THEN THE NET INTEREST ON A CERTIFICATE OF DEPOSIT YIELDING 5 PERCENT WOULD BE 3.5 PERCENT AFTER TAXES. 14. B ECAUSE A TAX ON INTEREST INCOME RESULTS IN INCOME AND SUBSTITUTION EFFECTS, IT IS NOT POSSIBLE TO PRE ­ DICT THE EFFECT IT WILL HAVE ON SAVING. 15. M OST EMPIRICAL STUDIES INDICATE THAT THE INTEREST ELASTICITY OF SUPPLY OF SAVINGS IS CLOSE TO ZERO. 16. I NCOME TAX BECAME A PERMANENT FIXTURE IN THE U NITED S TATES STARTING IN THE EARLY NINETEENTH CENTURY. 17. T HE H AIG -S IMONS DEFINITION OF INCOME IS DIFFERENT FROM COMPREHENSIVE INCOME. 18. C OMPREHENSIVE INCOME EQUALS CONSUMPTION PLUS THE CHANGE IN NET WORTH. M ULTIPLE C HOICE Q UESTIONS 1. C OMPREHENSIVE INCOME : A. IS THE SUM OF ANNUAL CONSUMPTION AND REALIZED CAPITAL GAINS. B. IS THE SUM OF ANNUAL CONSUMPTION AND CHANGES IN NET WORTH. C. EXCLUDES CORPORATION INCOME. D. IS THE SUM OF ANNUAL CONSUMPTION AND NET WORTH. 2. A TAX ON LABOR INCOME : A. RESULTS ONLY IN AN INCOME EFFECT THAT ALWAYS DECREASES HOURS WORKED PER YEAR.

B. RESULTS IN A SUBSTITUTION EFFECT THAT ALWAYS DECREASES HOURS WORKED PER YEAR. C. RESULTS IN AN INCOME EFFECT THAT INCREASES HOURS WORKED PER YEAR IF LEISURE IS A NORMAL GOOD. D. BOTH ( A ) AND ( B ) E. BOTH ( B ) AND ( C ) 3. T HE MARKET SUPPLY OF LABOR IS PERFECTLY INELASTIC. T HEN IT FOLLOWS THAT : A. THE SUBSTITUTION EFFECT OF WAGE CHANGES IS ZERO. B. THE INCOME EFFECT OF WAGE CHANGES IS ZERO. C. LEISURE IS A NORMAL GOOD AND THE INCOME EFFECT OF WAGE CHANGES EXACTLY OFFSETS THE SUBSTITUTION EFFECT. D. THE EXCESS BURDEN OF A TAX ON LABOR INCOME WILL BE ZERO. 4. T HE COMPENSATED LABOR SUPPLY CURVE : A. WILL ALWAYS BE VERTICAL. B. WILL ALWAYS BE UPWARD SLOPING. C. WILL ALWAYS BE DOWNWARD SLOPING. D. REFLECTS BOTH THE INCOME AND SUBSTITUTION EFFECTS OF WAGE CHANGES. 5. U SING A REGULAR LABOR SUPPLY CURVE INSTEAD OF A COMPENSATED SUPPLY CURVE TO CALCULATE THE EXCESS BURDEN OF A TAX ON LABOR INCOME WILL : A. RESULT IN AN ACCURATE ESTIMATE OF THE EXCESS BURDEN. B. OVERESTIMATE THE EXCESS BURDEN. C. UNDERESTIMATE THE EXCESS BURDEN.