Which of the Following Statements About Taxation Is Incorrect

question 56

Multiple Choice

Which of the following statements about taxation is incorrect?

• A)A tax cut affects aggregate demand indirectly.
• B)A tax cut raises income and expenditures.
• C)Cutting taxes by $20 is not the same as increasing government spending by $20.
• D)A change in taxes does not affect consumption.
• E)An increase in taxes decreases income and expenditures.

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Definitions:

Mutual Fund

A mutual fund is an investment vehicle made up of a pool of funds collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets.

Annual Return

The percentage gain or loss on an investment over a one-year period.

Graduation

This term is typically associated with the completion of a course of study at an educational institution, marked by the receipt of a diploma or degree.

Discount Rate

The interest rate used to determine the present value of future cash flows in discounted cash flow analysis. It reflects the time value of money and investment risk.