An Increase in Taxes of a Specific Amount Will Have

question 226

Multiple Choice

An increase in taxes of a specific amount will have a smaller impact on the equilibrium GDP than will a decline in government spending of the same amount because:

• A)the MPC is smaller in the private sector than it is in the public sector.
• B)declines in government spending always tend to stimulate private investment.
• C)disposable income will fall by some amount smaller than the tax increase.
• D)only part of the tax increase will affect the consumption negatively.

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Definitions:

Relevant Information

Relevant information comprises data that is applicable and helpful in making decisions, particularly in the context of financial and managerial accounting.

Qualitative Characteristic

Attributes that make the information provided in financial statements useful to users, including relevance, understandability, comparability, and reliability.

Cost Constraint

The principle that the cost of providing financial information should not outweigh the benefits that the information provides to users.

Generating Revenue

The process by which a company produces income from its operations, sales, or services.