Suppose Policy Makers, as Expected, Cut the Level of Taxes

question 45

Multiple Choice

Suppose policy makers, as expected, cut the level of taxes. Which of the following will occur as a result of this expected tax cut?

• A) An increase in stock prices.
• B) No change in stock prices.
• C) Stock prices decrease only if goods prices decrease.
• D) A decrease in stock prices.
• E) An ambiguous effect on stock prices.

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Definitions:

Inventory Management

The practice of overseeing and controlling the ordering, storage, and use of components or finished goods held in stock.

Inventory Carrying Charge

The total cost associated with holding inventory in stock, including storage, insurance, taxes, depreciation, and opportunity costs.

Order Quantity

The number of units ordered at once from a supplier, balancing between holding costs and ordering costs to achieve optimal inventory levels.

Inventory Policy

Guidelines or rules set by a business to manage and control levels of inventory and order timings.