If the Supply of Saving Is Not Perfectly Inelastic, Then

question 23

Multiple Choice

If the supply of saving is not perfectly inelastic, then substituting a value-added tax for an equal-yield general wealth tax will:

• A) decrease market equilibrium interest rates.
• B) increase the efficiency loss in labor markets.
• C) decrease the efficiency loss in labor markets.
• D) decrease efficiency in capital markets.
• E) both a and b

---

Definitions:

Total Equity

The total net worth of a company as calculated by subtracting total liabilities from total assets, representing the owners' stake in the company.

Times Interest Earned Ratio

A metric used to measure a company's ability to meet its interest payments, calculated as earnings before interest and taxes divided by interest expense.

Price-Earnings Ratio

A valuation ratio of a company's current share price compared to its per-share earnings, used to evaluate if a stock is over or under-valued.

Earnings Per Share

The amount of earnings a company makes, divided by its outstanding common shares, which reveals the firm's level of profitability.