1) Deductibility of an expenditure from AGI to determine taxable income:

A. generates a substitution effect away from the good whose expenditure is deductible

B. encourages spending on that good or service

C. improves the efficiency of the tax system

D. cannot be criticized as being unfair

2) Differences between taxable income and Haig-Simons income:

A. have no logical justification

B. arise to make the tax system more fair.

C. arise to simplify the system

D. arise both to make the system more fair and to simplify the system

3) Exclusion of state and local bond interest from federal income tax:

A. is an efficient means of subsidizing state and local governments

B. encourages state and local governments to reduce spending on local public services

C. costs the federal treasury less than the implicit savings of the state and local governments.

D. reduces the interest rate state and local governments must pay on borrowed funds