A Tax on Interest Earned from Saving Is an Example

question 28

Multiple Choice

A tax on interest earned from saving is an example of a tax with a high deadweight loss because

• A)it compels retired individuals to rely more heavily on Social Security.
• B)it encourages people to consume less and save more for their future expenditures.
• C)doing so amounts to double taxation since savings often come from income that has already been taxed once.
• D)the savings that are taxed could have been spent on capital goods which will benefit society.

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Definitions:

Prove Profitable

To demonstrate or confirm that an activity, investment, or venture is generating a financial profit or benefit.

Product-line Extension

The addition of new products to an existing line, offering customers new choices and expanding the product range.

Blueberry Cheerios

A flavor variety of Cheerios cereal that incorporates the taste of blueberries.

General Mills

A multinational manufacturer and marketer of branded consumer foods sold through retail stores.