Suppose There Is a Decrease in Taxes

question 13

Multiple Choice

Suppose there is a decrease in taxes. In an open economy, a tax cut will cause:

• A) a decrease in exports.
• B) a decrease in domestic output.
• C) a decrease in net exports.
• D) a decrease in imports.
• E) a decrease in foreign output.

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Definitions:

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity, useful for planning and controlling costs.

Responsibility Reports

Financial reports that measure the performance of departments and managers within an organization, emphasizing accountability.

Investment Center

A business unit or division that is responsible for its own revenues, expenses, and assets, and is evaluated based on its return on investment.

Return on Investment

A financial metric used to evaluate the efficiency or profitability of an investment relative to its cost.