A Tax on All Forms of Income Will

question 320

Multiple Choice

A tax on all forms of income will

• A)lower the effective rate of interest on savings.
• B)have no effect on savings.
• C)enhance social welfare because the benefits will outweigh the costs.
• D)enhance the incentives to save.

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Definitions:

Quantity Demanded

The quantity of a product or service that buyers are prepared and financially able to buy at a certain price.

Efficiency Loss

The loss of economic efficiency that can occur when equilibrium for a good or service is not achieved, leading to potential welfare or opportunity costs.

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service and the total amount they actually do pay.

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive, often due to higher market prices.