Using the Keynesian Model,the Effect of an Increase in Corporate

question 28

Multiple Choice

Using the Keynesian model,the effect of an increase in corporate taxes would be to cause ________ in the real interest rate and ________ in output in the short run.

• A)a decrease;a decrease
• B)a decrease;no change
• C)a decrease;an increase
• D)no change;a decrease

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Definitions:

Independent Projects

Projects that are evaluated for investment purposes, where the acceptance of one project does not affect the decision to undertake another.

IRR

A financial metric, the Internal Rate of Return, is applied to estimate the profitability prospects of potential investments.

AAR

Average Annual Return, representing the average amount of money earned by an investment each year over a given time period.

Discounted Payback

A capital budgeting method that calculates the time needed to recoup the initial investment in present value terms, considering the time value of money.