Which of the Following Statements Is FALSE

question 19

Multiple Choice

Which of the following statements is FALSE?

• A) Unrealized capital gains are taxable.
• B) Realized capital gains are taxable.
• C) Tax-exempt investments are attractive to individuals with high tax liabilities.
• D) Returns comparisons should be made on an equivalent tax basis.
• E) Tax exempt investors prefer tax exempt investments.

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Definitions:

Backward-Bending

A term often used in labor economics to describe the supply curve of labor, which can bend backwards at higher wage levels, indicating that higher wages can lead to a decrease in labor supply.

Substitution Effect

The economic principle that as the price of a good or service rises (or incomes decrease), consumers will replace pricier items with less costly alternatives, holding the utility derived from consumption constant.

Price Decreases

Price decreases occur when the cost of goods or services goes down, often due to factors like increased competition, lower demand, or decreases in production costs.

Income Effect

The effect of changes in either individual or economic income on the demand levels for goods or services.