The Tax Multiplier Is the Number That,when Multiplied by the

question 20

Multiple Choice

The tax multiplier is the number that,when multiplied by the

• A) budget deficit,gives us the change in total spending.
• B) budget deficit,gives us the change in the public debt.
• C) change in taxes,gives us the change in total spending.
• D) change in government spending,gives us the change in total spending.

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Definitions:

Financial Leverage

The use of borrowed funds with the aim to increase the returns on equity by financing projects with debt rather than equity.

EBIT

Earnings Before Interest and Taxes, a measure of a company's profitability excluding interest and income tax expenses.

Capital Structure

Capital structure refers to the mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity, which is considered when financing its overall operations and growth.

Bankruptcy Risk

Bankruptcy risk refers to the likelihood that a company will be unable to meet its debt obligations and may be forced into bankruptcy.