Which of the Following Statements About the Income Effect of an Income

question 18

Multiple Choice

Which of the following statements about the income effect of an income tax rate increase is true?

• A)The income effect is theoretically stronger for low-income taxpayers than for high-income taxpayers.
• B)The income effect is theoretically stronger for a family's secondary wage earner than for the family's primary wage earner.
• C)The income effect motivates individuals to find ways to increase their before-tax income.
• D)Both A.and C.are true.

---

Definitions:

Cost Recovery Method

An accounting technique used to defer the recognition of income until the cash received from a transaction exceeds the costs associated with it.

Realized Gross Profit

The gross profit that is actually earned and recognized on sales transactions, after the cost of goods sold has been deducted.

Cash Collections

The process of gathering and managing the cash from sales, financing, or other sources of revenue for a business.

Revenue Recognition

The accounting standard that identifies the exact circumstances where revenue is considered or documented.