8 . The substitution effect of a tax-induced decline in wages always leads workers to work less .
9 . The market wage elasticity of labor is zero . If this is the case , the excess burden of a tax on labor income will also be zero .
10 . Points on a compensated labor supply curve are always more elastic than points for corresponding wage levels on a regular labor supply curve .
11 . Comprehensive income is the sum of annual consumption and the change in net worth .
12 . A tax on interest income does not prevent credit market from efficiently allocating resources .
13 . If an individual is subject to a 30-percent income tax , then the net interest on a certificate of deposit yielding 5 percent would be 3.5 percent after taxes .
14 . Because a tax on interest income results in income and substitution effects , it is not possible to predict the effect it will have on saving .
15 . Most empirical studies indicate that the interest elasticity of supply of savings is close to zero .
16 . Income tax became a permanent fixture in the United States starting in the early nineteenth century .
17 . The Haig-Simons definition of income is different from comprehensive income . 18 . Comprehensive income equals consumption plus the change in net worth . Multiple Choice Questions 1 . Comprehensive income : a . is the sum of annual consumption and realized capital gains . b . is the sum of annual consumption and changes in net worth . c . excludes corporation income . d . is the sum of annual consumption and net worth . 2 . A tax on labor income : a . results only in an income effect that always decreases hours worked per year .