Chipper Borrowed Money from Several Creditors for Personal Uses

question 120

Multiple Choice

Chipper borrowed money from several creditors for personal uses. At a time when his assets are worth $120,000 and his debts are $140,000, his creditors agree on a compromise settlement in which they forgive $26,000 of the debt. How much of the $26,000 is included in Chipper's Gross Income?

• A)$- 0 -
• B)$6,000
• C)$13,000
• D)$20,000
• E)$26,000

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Definitions:

Compensated Demand Function

A demand function that adjusts for changes in income to show how quantities demanded by consumers change in response to a price change while keeping utility constant.

Adequately Paid

Compensation that meets or exceeds the value of the work performed or the qualifications of the individual.

Utility Function

This describes a formula used in economics to quantify the happiness or satisfaction obtained by a consumer from consuming goods and services.

Substitution Effect

The alteration in how goods are consumed as a result of shifts in relative prices, while maintaining the same level of satisfaction for the consumer.