An Increase in Taxes of a Specific Amount Will Have

question 111

Multiple Choice

An increase in taxes of a specific amount will have a smaller impact on the equilibrium GDP than will a decline in government spending of the same amount because

• A) the MPC is smaller in the private sector than it is in the public sector.
• B) declines in government spending always tend to stimulate private investment.
• C) disposable income will fall by some amount smaller than the tax increase.
• D) some of the tax increase will be paid out of income that would otherwise have been saved.

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Definitions:

Income Statement

A report indicating a business's income, outgoings, and net earnings during a defined timeframe.

Income Tax Expense

The amount of money a company or individual owes to the government based on their taxable income for a given period.

Other Revenues

Income generated from activities that are not part of a company's primary operations, such as rental income, interest income, or gains from the sale of fixed assets.

Earnings Per Share

A financial metric calculating the portion of a company's profit allocated to each outstanding share of common stock.