Which of the Following Is NOT a Result of the Double

question 101

Multiple Choice

Which of the following is NOT a result of the double taxation of dividends?

• A) Because profits that firms distribute to stockholders are taxed a second time, firms have an incentive to retain profits rather than to distribute them to stockholders.
• B) The return investors receive from buying stocks is reduced, which reduces the incentive people have to save in the form of stock investments and increases the costs to firms of raising funds.
• C) It gives firms an incentive to take on what may be an excessive level of debt rather than issue stock.
• D) The decline in retained profits results in increased inefficiency.

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Definitions:

Cross Elasticity of Demand

A measure of how the quantity demanded of one good responds to a change in price of another good, indicating the degree of substitutability between the two goods.

Complements

Goods or services that are used together, so that the consumption of one enhances the consumption of the other.

Substitutes

Products or services that can replace each other in satisfying a consumer's needs or wants.

Monthly Consumption

The total amount of goods and services that consumers purchase and use within a month.