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    Question

    The Haig-Simons definition of comprehensive income is

    best described as:
    A Income from wages and salaries only. Correct Answer Incorrect Answer
    B The sum of consumption and change in net wealth in a given period. Correct Answer Incorrect Answer
    C Corporate profits before tax. Correct Answer Incorrect Answer
    D National income minus indirect taxes. Correct Answer Incorrect Answer
    E Disposable personal income. Correct Answer Incorrect Answer

    Solution

    The Haig-Simons definition is a benchmark for an ideal income tax base. It defines income as the money value of the net increase in an individual's power to consume during a period. Algebraically: Income = Consumption + ΔNet Worth. It aims to include all forms of accretion to wealth (wages, capital gains, gifts, etc.).

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