A Change in a Fixed Tax Will Cause the Consumption

question 18

Multiple Choice

A change in a fixed tax will cause the consumption schedule to

• A)become steeper.
• B)become flatter.
• C)shift in a parallel manner.
• D)remain fixed as the economy moves along the schedule.

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Definitions:

Par Value

The legal capital assigned per share of a stock, which is a nominal value rather than indicative of the market price.

Discount

A reduction from the full amount or value of an item or security, often applied to bonds sold below their face value or to promote sales of products.

Coupon Interest Rate

The percentage of a bond's value that is paid out in interest to the bondholder annually, identical to the coupon rate.

Yield To Maturity

The total return anticipated on a bond if it is held until it matures, considering all interest payments and the repayment of principal.