Identify Which of the Following Statements Is True

question 4

Multiple Choice

Identify which of the following statements is true.

• A)A corporation accumulates earnings to fund the redemption of a shareholder's stock following her death so as to provide her estate with liquidity to pay death taxes. Such an accumulation of earnings is a reasonable business need.
• B)A corporation accumulates earnings to fund a buy-sell agreement. Such an accumulation of earnings is a reasonable business need.
• C)A corporation's net capital gain (minus any federal income taxes paid with respect to such gain)increases the tax base for the accumulated earnings tax.
• D)All of the above are false.

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Definitions:

Velocity V

Velocity V typically refers to the velocity of money, a measurement of the rate at which money is exchanged in an economy.

Percentage Fall

A measure that indicates the decrease in a value or quantity, expressed as a percentage of its previous value.

Full Employment

A situation in which all available labor resources are being used in the most economically efficient way.

Quantity Theory of Money

A theory stating that the general price level of goods and services is directly proportional to the amount of money in circulation.