A Lump-Sum Increase in Current Taxes Would Cause Interest Rates

question 83

Multiple Choice

A lump-sum increase in current taxes would cause interest rates to

• A)fall if Ricardian equivalence held.
• B)fall if Ricardian equivalence did not hold.
• C)fall regardless of whether Ricardian equivalence held.
• D)rise.

---

Definitions:

Target Net Profit

Target net profit is the specific amount of net income that a company aims to achieve within a certain period, guiding pricing, cost management, and sales volume strategies.

Unit Contribution Margin

The difference between the selling price per unit and the variable cost per unit. This figure shows how much each unit contributes to covering fixed costs and generating profit.

Fixed Costs

Expenses that do not change in total as production volume increases or decreases, such as rent and salaries.

Safety Margin

The difference between the actual level of sales or production and the break-even point, measuring the cushion a company has before it incurs losses.