An Investment Tax Credit, Typically Used to Stimulate Investment Spending

question 51

Multiple Choice

An investment tax credit, typically used to stimulate investment spending considered to be too low,

• A) increases the cost of capital to firms through the addition of new taxes.
• B) provides a taxpayer subsidy directly to firms making capital expenditures.
• C) provides little incentive for a permanently higher level of capital stock.
• D) should provide a burst of net investment activity in the economy, but little support has been found for this hypothesis.
• E) has no effect on the volatility of investment, since investment is low when such a policy is warranted and consequently restored only to where it should have been.

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Definitions:

Debt Management

The process of overseeing and controlling an individual's or organization's debt load through various strategies and planning.

Vertical Analysis

A method of financial statement analysis in which each entry for each of the three major categories of accounts (or assets, liabilities, and equity) is represented as a proportion of the total account.

Net Income

The total earnings of a company after accounting for all expenses and taxes; also known as net profit.

Net Sales

represents the amount of sales revenue remaining after deducting returns, allowances for damaged goods, and discounts.