A Tax Is Efficient If

question 253

Multiple Choice

A tax is efficient if

• A)individuals with the lowest incomes pay proportionately lower taxes than individuals with the highest incomes.
• B)it is based on profits earned and not on wages.
• C)it encourages saving and investment.
• D)it imposes a small excess burden relative to the revenue it raises.

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Definitions:

Risk-Free Portfolio

An investment group that is considered to have no risk of financial loss, typically represented by government bonds.

Expected Rate

The return that an investor anticipates or forecasts receiving on an investment over a set period.

Correlation Coefficient

A statistical measure ranging from -1 to 1 that indicates the strength and direction of a linear relationship between two variables.

Covariance

A measure that demonstrates how two random variables move together, indicating the direction of their linear relationship.