The Distinction Between Consumption and Investment Is

question 22

Multiple Choice

The distinction between consumption and investment is:

• A)that only households consume and only businesses invest.
• B)somewhat arbitrary, since investment includes housing investment, which does not increase future productive capacity.
• C)that investment always increases future productive capacity, while consumption does not.
• D)arbitrary, since the same expenditure may be counted as a consumption item in one year and an investment in another.

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Definitions:

Asset/Liability Method

An accounting technique used for measuring the deferred tax liabilities and assets by considering the temporary differences between the accounting and tax values of assets and liabilities.

Deferred Tax Liability

A tax obligation that a company owes but is not required to pay until a future date, often due to timing differences between accounting practices and tax laws.

Pretax Financial Income

The amount of income that a company has earned before any taxes have been deducted.