Which of the Following Statements Regarding Tax Credits Is True

question 59

Multiple Choice

Which of the following statements regarding tax credits is true?

• A)Tax credits reduce taxable income dollar for dollar.
• B)Tax credits provide a greater tax benefit the greater the taxpayer's marginal tax rate.
• C)Tax credits reduce taxes due dollar for dollar.
• D)None of these statements are true.

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Definitions:

Monetary Neutrality

The idea that changes in the money supply only affect nominal variables (like prices) in the long run and have no effect on real variables (like output or employment).

Money Supply

The combined total of all monetary resources in an economy at a designated time, including cash, coins, and balances in checking and savings accounts.

Velocity

The rate at which money is exchanged from one transaction to another, and how much money is used for purchasing goods and services within a certain period.

Quantity Equation

An equation that relates the quantity of money in an economy to the nominal value of transactions, used in economics to describe the relationship between money supply and price level.