Ward and June Are in the 32% Tax Bracket

question 40

Multiple Choice

Ward and June are in the 32% tax bracket. Included in their assets is a Dell Corporation bond with a face value of $10,000. The bond pays $1,000 a year in interest. Ward and June make a gift to their son, Wally (age 19) of the $1,000 in interest income. Wally is in the 10% tax bracket. What is Ward and June's tax liability related to the bond and the bond interest for the current year?

• A)$-0-
• B)$100
• C)$320
• D)$1,000
• E)$3,200

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Definitions:

Total Utility

The overall satisfaction or benefit a person receives from consuming a particular quantity of goods or services.

Income Effect

The alteration in a person's or an economy's earnings and its effect on the amount of a product or service they seek to purchase.

Law of Demand

The principle that there is an inverse relationship between the price of a good and the amount of it consumers are willing to buy, all else being equal.

Income Effect

How an individual's or an economic system's revenue shift affects the demand level for a particular good or service.