Consider a Tax Cut Which Affects Not Only Consumer Disposable

question 185

Multiple Choice

Consider a tax cut which affects not only consumer disposable income,but also after-tax earnings from labor supplied to labor markets and from financial assets acquired through saving.In the long run we would expect this tax cut to

• A)decrease the price level and increase the level of real GDP.
• B)increase both the price level and the level of real GDP.
• C)decrease the level of real GDP.
• D)decrease the price level.

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Definitions:

Depreciated

Depreciation refers to the accounting practice of spreading out the expense of a physical asset over the duration of its expected lifespan.

Tax Purposes

Considerations or actions taken within financial contexts to optimize tax liability, including strategies for deductions, credits, and structuring transactions.

CCA Rate

Refers to the Capital Cost Allowance rate, which is used in taxation to represent the annual depreciation expense of a physical asset's cost.

NPV

Net Present Value, a financial metric that calculates the difference between the present value of cash inflows and the present value of cash outflows over a period of time.