Many People Choose to Submit Payroll Forms to Their Employers

question 11

Multiple Choice

Many people choose to submit payroll forms to their employers that result in more income taxes being withheld than these employees actually will owe in income taxes.According to behavioral scientists,the most likely explanation for this behavior is that:

• A) The IRS, in paying tax refunds, pays generous interest rates on excess amounts withheld from taxpayers' earnings during the year
• B) Over-withheld taxes are viewed favorably by credit reporting agencies, which enhances taxpayers' self-esteem
• C) The principle of loss aversion
• D) The principle of moral reminders

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Definitions:

Expected Utility Maximizer

An economic agent who makes choices under uncertainty to maximize their expected satisfaction or utility.

Wealth

The abundance of valuable financial assets or physical possessions which can be converted into a form that can be used for transactions.

Risk Averter

An individual or entity that prefers to avoid risk, choosing options that have a more certain outcome even if it potentially means receiving lower returns.

Variance

A measure of dispersion that shows how much the values in a set differ from the mean or expected value.