When We Add a Personal Income Tax to the Macroeconomic

question 168

Multiple Choice

When we add a personal income tax to the macroeconomic model, the

• A)multiplier becomes larger.
• B)multiplier becomes smaller.
• C)expenditures schedule shifts upward.
• D)expenditures schedule becomes steeper.

---

Definitions:

Capital Budgeting

The process by which investors and managers decide which significant investments or projects to undertake, based on potential profitability.

Risk

The potential for loss, damage, or any other negative occurrence that may be avoided through preemptive action.

Probability Distributions

Mathematical functions that describe all the possible values and likelihoods that a random variable can take within a given range.

Cost of Capital

The cost of funds used for financing a business, calculated as the weighted average of debt and equity costs.