Suppose There Is an Increase in Expected Future Taxes

question 17

Multiple Choice

Suppose there is an increase in expected future taxes. This will cause which of the following to occur?

• A) The IS curve to shift left in the current period.
• B) The IS curve to shift right in the current period.
• C) The LM curve to shift up in the current period.
• D) The LM curve to shift down in the current period.
• E) Both the IS and LM curves shift left in the current period.

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Definitions:

Value-Based Pricing

A pricing strategy where the price of a product or service is determined based on the perceived value to the customer rather than the cost of production.

Required Return

The minimum expected return by investors for investing in a particular security or project, reflecting the risk level.

Investment

The allocation of resources, such as capital, time, or assets, with the expectation of receiving future benefits or returns.

Useful Life

The estimated duration of time an asset is expected to be useful for the business before it becomes obsolete or too costly to maintain.