In the Short Run, a Tax Increase

question 29

Multiple Choice

In the short run, a tax increase

• A) shifts the DD curve to the right, increases output and appreciates the currency.
• B) shifts the AA curve to the left, increases output and depreciates the currency.
• C) shifts the AA curve to the left, decreases output and depreciates the currency.
• D) shifts the AA curve to the left, increases output and appreciates the currency.
• E) shifts the DD curve to the left, decreases output and depreciates the currency.

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Definitions:

Capital Budgeting

The process in which a business evaluates and plans for significant investments or expenditures.

Net Present Value

A method used in capital budgeting to assess the profitability of an investment or project, considering the time value of money.

Operating Cash Inflows

Cash received by a company from its operational activities, such as sales revenue minus the operating expenses.

Working Capital Investment

Funds invested in the short-term assets of a company, such as inventory and receivables, to support its day-to-day operations.