Deck 18: Personal Taxation and Behaviour

Question 1

are tax-deductible.

A)Tax-Free Savings Accounts (TFSAs)
B)Registered Pension Plans (RPPs)
C)Registered Retirement Savings Plans (RRSPs)
D)answers B and C

Answer 1

answers B and C

Question 2

When interest receipts are taxable but interest payments are nondeductible, the intertemporal budget constraint is

A)a straight line.
B)kinked at the chosen consumption bundle.
C)kinked at the endowment point.
D)U-shaped.

Answer 2

kinked at the endowment point.

Question 3

The theoretical effects of taxation on portfolio composition are ambiguous.

A)True
B)False
C)Uncertain

Answer 3

True

Question 4

Taxing savings will cause people to save more.

A)True
B)False
C)Uncertain

Question 5

In the leisure-income model, taxing income causes

A)utility to increase.
B)the budget constraint to kink.
C)an increase in the number of hours worked.
D)all of these answer options are correct.

Question 6

Evidence suggests for males age 25-60, taxes have a substantial effect on hours worked.

A)True
B)False
C)Uncertain

Question 7

A decrease in the interest rate will cause the intertemporal budget constraint to through the endowment point.

A)shift counter-clockwise
B)shift clockwise
C)pivot counter-clockwise
D)pivot clockwise

Question 8

Returns to investments in human capital can be calculated with great accuracy.

A)True
B)False
C)Uncertain

Question 9

Full loss offset allows individuals to

A)claim children as dependents.
B)deduct mortgage interest from taxes.
C)deduct capital losses from taxable income.
D)deduct savings interest from taxes.

Question 10

An individual's consumption and saving behaviour during a given year, as a result of a planning process that considers his or her lifetime economic situations, is known as the

A)consumption model.
B)life-cycle model.
C)leisure-income model.
D)lifetime model.

Question 11

A marginal tax rate above 40 percent is a psychological threshold that economists warn will encourage tax avoidance.

A)True
B)False
C)Uncertain

Question 12

The income effect

A)induces an individual's number of hours worked to remain constant.
B)tends to induce an individual to work less.
C)tends to decrease labour supply.
D)tends to induce an individual to work more.

Question 13

Neither imputed rent nor capital gains from a primary residence are taxed in Canada.

A)True
B)False
C)Uncertain

Question 14

The possible combinations of present and future consumption is

A)the lifetime budget constraint.
B)the Laffer curve.
C)the time endowment.
D)the intertemporal budget constraint.

Question 15

Owner-occupied housing in Canada receives more favourable treatment than in the United States.

A)True
B)False
C)Uncertain

Question 16

Increasing wage rates will result in more hours worked.

A)True
B)False
C)Uncertain

Question 17

As long as the capital market is competitive, a decrease in saving does not create a gap between the demand for investment funds and their supply."

A)True
B)False
C)Uncertain

Question 18

The analysis of a progressive tax is very similar to that of a proportional tax.

A)True
B)False
C)Uncertain

Question 19

To accurately draw a labour supply curve, there should be a relationship between ________ and _.

A)total expenditures; the wage rate
B)taxes; utility
C)the wage rate; utility
D)the wage rate; hours worked

Question 20

The Laffer curve is

A)a curve that refers to the endowment of time.
B)a curve that describes the relationship between tax rates and tax revenues.
C)used to describe the relationship between hours of leisure and hours worked.
D)never referred to in modern-day discussions of public finance.

Question 21

Refer to the figure below. The intercept point N is found by I1 + I0(1 + r). The intercept point M is calculated by I0 + I1/(1 + r). Show that the slope of the budget constraint is indeed .

Question 22

On the Laffer curve, an increase in tax rates causes tax revenue to increase if the starting point is

A)to the left of the top.
B)to the right of the top.
C)exactly at the top.
D)to the farthest point to the right.

Question 23

Sometimes increases in the wage rate will cause individuals to work more hours. It is also the case that this same increase could cause people to work fewer hours. What is happening to cause this variance?

Question 24

A compensation package offered by employers often includes

A)life insurance.
B)wages.
C)health benefits.
D)all of these answers are correct.

Question 25

Suppose the labour supply equation is L = (W/3)- (4/3). The wage rate is initially 5. What is the amount of producer surplus here?

Question 26

Jennifer lives in two periods. In the first period, her income is fixed at $72,000; in the second, she is gets a 4% raise in her income. She can borrow and save at the market interest rate of 5 percent.
(A)Sketch her intertemporal budget constraint.
(B)Suppose that Jennifer is unable to lend at any rate of interest, although she can still borrow at 5 percent. Sketch her new intertemporal budget constraint.

Question 27

In the textbook, there was a discussion of the average numbers of hours worked in Canada is around 30 hours per week. As you enter the workforce, do you expect this number to increase or decrease?

Question 28

Human capital is

A)more costly than other forms of capital.
B)the accumulation of investments that make people more productive.
C)how firms use more humans than machines in the production process.
D)none of these answers is correct.

Question 29

An intertemporal budget constraint

A)requires time to move in a loop.
B)requires an endowment point.
C)has no endowment point.
D)requires time to remain constant.

Question 30

The consumption bundle that is available, if there are no exchanges with the market, is known as the

A)Ramsey rule.
B)endowment point.
C)budget line.
D)interest payment.

Question 31

Refer to the figure below. If the total number of hours (T)per week is 168 and the wage rate is $10, how much consumption is possible if the number of hours worked is 35? How does your answer change if the wage rate decreases to $8.50 but number of hours worked also increases to 40?