Assume That Taxes Depend on Income

question 143

Multiple Choice

Assume that taxes depend on income. The MPC is 0.8 and t is 0.2. The government spending multiplier is

• A) 1.25.
• B) 2.78.
• C) 4.
• D) 4.17.

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Definitions:

Net Incomes

The total earnings of a company after deducting all expenses, taxes, and costs from its total revenues.

Deferred Income Tax

Deferred Income Tax is a liability on a company's balance sheet that results from income already earned and recognized for accounting purposes but not yet subject to taxation.

Fair Value

The estimated market price of an asset or liability, reflecting what a willing buyer would pay to a willing seller in an arm's length transaction.

Tax Rate

The proportion of income that is taken as tax from a person or business.