Suppose We Are Studying the Effects of Expanded Income Supplement

question 10

Multiple Choice

Suppose we are studying the effects of expanded income supplement for senior citizens on their health. We use the two-group, to-period differences-in-differences setup, with working-age citizens as our control group. Which of the following is a key assumption for the validity of this identification strategy?

• A)In the absence of the intervention, the average health outcomes would be the same for both groups.
• B)Before the intervention, the average health outcomes were the same for both groups.
• C)After the intervention, the average health trends would be the same for both groups.
• D)In the absence of the intervention, the average health trends would be the same for both groups.

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Definitions:

Deferred Tax Asset

Represents future tax relief for a company, arising from deductible temporary differences, carryforward losses, or credits.

Accrued Product Warranty Costs

Costs that have been incurred but not yet paid for product warranties, recognized as liabilities on the balance sheet.

Enacted Tax Rates

The legally approved rates of taxation set by governmental authorities.

Pre-Tax Book Income

Income of a business before the deduction of tax expenses as reported in the financial statements, not necessarily reflective of taxable income.