Which One of the Following Statements Concerning the Tax Treatment

question 124

Multiple Choice

Which one of the following statements concerning the tax treatment of municipal bonds is correct?

• A) The interest income on municipal bonds is subject to federal income tax.
• B) The capital gain realized on the sale of a municipal bond is tax-free income.
• C) Interest income on a municipal bond is usually exempt from state and local income taxes if the bond is issued by the state or locality in which the investor resides.
• D) Municipal bonds receive no special income tax treatment.

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Definitions:

Frictional Unemployment

Refers to people who are between jobs or just entering or reentering the labor market.

Rate of Inflation

The percentage increase in the price level of goods and services in an economy over a period of time.

Misery Index

An economic indicator created by adding the unemployment rate to the inflation rate, meant to represent the average citizen's economic well-being.

Unemployment Rate

The segment of the labor force that is currently jobless and engaging in job-seeking activities.