The Idea That People Change Their Behavior in Response to Taxes

question 86

Multiple Choice

The idea that people change their behavior in response to taxes is

• A) highly controversial among economists.
• B) accepted by economists, but debated by those in Congress.
• C) uncontroversial among economists.
• D) None of these statements is true.

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Definitions:

Profitability Index

The profitability index measures the relationship between the present value of future cash flows and the initial investment.

Hurdle Rate

The minimum rate of return on a project or investment required by a manager or investor.

Payback Method

An investment appraisal technique that calculates the amount of time required for an investment to generate cash flows sufficient to recover its initial cost.

Cash Inflows

Money or equivalent value received by a business, often from operations, investments, or financing activities.