The Effect of the Personal Income Tax on the Amount

question 25

Multiple Choice

The effect of the personal income tax on the amount of labor employed in the economy is greatest when

• A)demand and supply are both relatively elastic.
• B)demand and supply are both relatively inelastic.
• C)demand is relatively inelastic and supply is relatively elastic.
• D)demand is relatively elastic and supply is relatively inelastic.
• E)both supply and demand do not exist.

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Definitions:

Interest Rate Parity

A financial theory stating the difference in interest rates between two countries is equal to the expected change in exchange rates between their currencies.

Forward Contract

An agreement to buy or sell an asset at a future date for a price agreed upon today, without the standardization of futures contracts.

Exchange Rate Risk

The potential for investors to experience losses due to changes in the exchange rate between two currencies.

Short-term

This term usually refers to a period of time less than one year, often used in the context of finance for investments or liabilities.