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The Purpose of the Excise Tax Imposed on a Private

question 23

True/False

The purpose of the excise tax imposed on a private foundation for failure to distribute sufficient levels of income is to motivate the foundation to distribute more of its income for application to exempt purposes.


Definitions:

Normal Good

A type of good for which demand increases as the income of individuals rises, holding all other factors constant.

Giffen Good

A product for which demand increases as its price increases, contrary to the standard demand model, due to the interplay of income and substitution effects.

Income Effect

The change in an individual's or economy's income and how that change affects the quantity demanded of a good or service.

Price Decrease

A reduction in the cost of a good or service, which can increase consumer demand but may decrease supplier profits.

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