If You Expect the Economy Is Going to Boom and Average

question 125

Multiple Choice

If you expect the economy is going to boom and average income in the economy will rise in the foreseeable future, the type of firm that would be able to increase its sales if your expectations are met is

• A)one that sells an inferior good.
• B)one that sells a necessity good.
• C)one that sells a luxury good.
• D)one that sells a price-inelastic good.

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Definitions:

Future Cash Flows

Estimated future financial transactions that involve the inflow or outflow of money over a period of time.

Capital Cost Allowance

Refers to the depreciation expense that a company can claim for tax purposes on tangible and intangible assets over their useful life.

Tax Shield

The reduction in income taxes that results from taking allowable deductions from taxable income.

Depreciable Asset

A depreciable asset is a type of property that an organization can write off as an expense over time due to its potential to lose value, such as buildings, machinery, and equipment.