The Reason That the Multiplier Is Smaller If There Are

question 23

Multiple Choice

The reason that the multiplier is smaller if there are variable taxes is that

• A)taxes add to government spending, which increases income.
• B)people get angry about taxes and decide to work less.
• C)tax increases shift the expenditure line upward.
• D)part of an increase in income is taken away in taxes.

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Definitions:

Operating Expenses

Costs associated with a company's operations, such as sales and marketing, administration, and rent.

Capital Budgeting

The process of planning and evaluating expenditures on assets whose cash flows are expected to extend beyond one year, such as new machinery or building expansions.

Incremental Sales

Additional sales generated by a new business activity, such as a marketing campaign or product launch, beyond what would have been sold without it.

Operating Expenses

Costs associated with running a business that are not directly linked to the production of goods or services, including rent, utilities, and administrative salaries.