As Government Becomes Larger and Larger as a Share of the Economy

question 128

Multiple Choice

As government becomes larger and larger as a share of the economy, economic growth is likely to decline because

• A) taxes are reduced to levels that are inconsistent with economic efficiency.
• B) governments are involved in many activities for which they are ill-suited.
• C) tax-transfer activities are reduced and sometimes virtually eliminated.
• D) governments do not spend enough on the provision of key public goods like education.

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Definitions:

Tax Basis

The value of a taxpayer's investment in property for tax purposes, used to calculate gain or loss on a sale or transfer.

Tax Rate

The proportion of income or corporate profits charged by the government as tax.

Consolidated Balance Sheet

An aggregated financial statement that shows all assets, liabilities, and equity of a parent company and its subsidiaries.

Control Investment

An investment in which the buyer gains significant influence or control over the operations of the investee.