When Will a Change in the Tax Laws That Increases

question 5

Multiple Choice

When will a change in the tax laws that increases the supply of loanable funds have a bigger effect on investment?

• A) when the demand for loanable funds is more elastic and the supply of loanable funds is more inelastic
• B) when the demand for loanable funds is more inelastic and the supply of loanable funds is more elastic
• C) when both the demand for and supply of loanable funds are more elastic
• D) when both the demand for and supply of loanable funds are more inelastic

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Definitions:

Present Value of Annuity

The current worth of a stream of equal payments made at regular intervals, discounted at a specific interest rate.

Capital Investment Evaluation Methods

Techniques used to assess the value and potential return of investments a business makes in long-term assets, including net present value, return on investment, and payback period analysis.

Average Rate of Return on Investment

A financial metric that compares the amount of profit expected or gained from an investment relative to its cost.

Net Present Value

A method used in capital budgeting to evaluate the profitability of an investment, calculated as the difference between the present value of cash inflows and the present value of cash outflows over a period of time.