Which of the Following Is an Example of a Commitment

question 35

Multiple Choice

Which of the following is an example of a commitment device?

• A) Lu-yin has part of each paycheck deposited in a vacation savings account
• B) Tassili is indifferent between (a) paying $1 in three years and receiving $2 in four years or (b) paying $1 today and receiving $2 next year
• C) Frank eats a piece of cake today and saves the rest of the cake for eating later

---

Definitions:

Personal Property

Property that includes movable items such as furniture, cars, and investments, as opposed to real estate.

200% Declining-Balance Rate

A method of accelerated depreciation allowing for a double rate of depreciation on assets, compared to the straight-line method.

MACRS

The Modified Accelerated Cost Recovery System, a method of depreciation for tax purposes that allows faster write-offs on property.

Mid-Month Convention

A rule for depreciation of business assets that assumes assets are acquired and disposed of at the midpoint of the month.