Which of the Following Statements About the Income and Substitution

question 61

Multiple Choice

Which of the following statements about the income and substitution effects of an income tax rate increase is true?

• A) The income and substitution effects are contradictory behavioral reactions.
• B) From the government's perspective, the substitution effect is more desirable than the income effect.
• C) Faith in the income effect is the foundation for supply-side economic theory.
• D) Dynamic forecasts of incremental tax revenues must consider the potential income effect but not the potential substitution effect of a rate increase.

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Definitions:

Working-Class Women

Refers to women belonging to the socio-economic class that is employed in manual labor or industrial work, often facing distinct social and economic challenges.

Domestic Service

Work involving household tasks such as cleaning, cooking, and child-rearing, often performed by hired personnel within private homes, traditionally a common form of employment for women.

Working-Class Family

A family whose income earners are employed in blue-collar jobs or occupations, which typically involve manual labor or skilled trades.

Sunshine And Shadow

A metaphorical expression representing the alternation or coexistence of positive (sunshine) and negative (shadow) aspects of life.