A Decrease in the Tax Rate Is More Likely to Increase

question 2

Multiple Choice

A decrease in the tax rate is more likely to increase the standard of living if the income effect of a change in the interest rate is

• A)small and an increase in private saving tends to have a small impact on the capital stock.
• B)small and an increase in private saving tends to have a large impact on the capital stock.
• C)large and an increase in private saving tends to have a small impact on the capital stock.
• D)large and an increase in private saving tends to have a large impact on the capital stock.

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Definitions:

Voting Common Stock

Shares that give the holder the right to vote on company matters, such as elections for the board of directors.

Consolidated Financial Statements

Financial statements that present the assets, liabilities, equity, income, expenses, and cash flows of a parent company and its subsidiaries as a single entity.

Operating Expenses

Costs associated with the day-to-day operations of a business, excluding cost of goods sold, taxes, and interest expenses.