A Valuation Allowance Can Reduce Both a Deferred Tax Asset

question 8

True/False

A valuation allowance can reduce both a deferred tax asset and a deferred tax liability.

---

Definitions:

Great Recession

A significant global economic downturn that began in 2007 and lasted until 2009, marked by the collapse of the housing market and financial crisis.

Keynesian

Relating to the economic theories of John Maynard Keynes, which advocate for government intervention to manage business cycles and stimulate the economy during downturns.

New Classical

An economic theory that emphasizes the importance of rational expectations and market-clearing prices in understanding economic fluctuations.

Rational Expectations

The hypothesis that forecasts of future values of economically relevant variables are based on all available information and are therefore optimal.