A Decrease in Taxes Will Have No Effect on Real

question 136

Multiple Choice

A decrease in taxes will have no effect on real GDP if

• A)people look at changes in taxes only in the present.
• B)there is no crowding out.
• C)the Ricardian equivalence theorem holds.
• D)the tax decrease is offset by an increase in government spending.

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Definitions:

Balance Sheet

A financial outline showing the holdings, debts, and the portion belonging to shareholders of a company on a certain date.

Adjustment

Modifications made to financial records to correct errors, align with accounting standards, or reflect changes due to transactions or events.

Fixed Assets

Long-term tangible assets that a firm owns and uses in the production of its income and is not expected to be converted into cash in the short term, such as buildings, machinery, and land.

Depreciation

A method in accounting that spreads the expense of a tangible asset across its lifespan.