Ch20 - Taxes, Inflation, and Investment Strategy 1. _ would...

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Taxes, Inflation, and Investment Strategy 1. ___ would be an example of "global" consumption smoothing. a. Borrowing to buy a car b. Borrowing to buy a home c. Saving to send children to college d. Saving for retirement 2. Inflation has an adverse effect on your retirement savings plan because ___ . a. It erodes the purchasing power of the dollars you have saved b. It increases the real rate of return on the dollars you save c. It increases your savings rate
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d. All of the above 3. The risks inherent in tilting savings toward later years can be mitigated by insuring against ___. a. Career failure b. Disability c. Unemployment d. All of the above 4. Holding all other assumptions the same in a retirement plan, an increase in taxes will lower ___ . a. Real consumption b. Savings
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c. The retirement fund d. All of the above 5. Whether to reduce current consumption through a higher savings rate or to invest retirement savings in a risky portfolio with a higher expected return is a question of ___ . a. Wealth b. Age c. Risk tolerance d. None of the above 6. A decrease of 1% in both your tax exemption and your income tax rate would ___ . a. make you better off
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b. make you worse off c. make you neither better off or worse off d. make you better or worse off depending on your age 7. Tax shelters ___ . a. Postpone payment of tax liabilities b. Decrease investment risk c. Increase the savings rate d. All of the above 8. The tax effect of an IRA is to ___ taxes. a.
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b. Postpone c. Erase d. Avoid 9. The U.S. income tax code is generally ___ . a.
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Ch20 - Taxes, Inflation, and Investment Strategy 1. _ would...

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