A Reduction in the Net Tax Rate Might Lead to an Increase

question 32

Multiple Choice

A reduction in the net tax rate might lead to an increase in the growth rate of potential output if

• A)the simple multiplier is large.
• B)the tax cuts stimulate private investment.
• C)firms are operating at their normal capacity.
• D)households are not forward looking.
• E)the marginal propensity to consume is large.

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Definitions:

Supply Chain

The supply chain is a system of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer.

Buffer Inventory

Inventory kept in reserve to protect against unforeseen supply or demand fluctuations.

Supply Chain Inventory

This is the total of all the goods and raw materials held by different companies participating in the supply chain from production to the sale of the final product.

Physical Flow

The movement of physical goods and materials through a supply chain from suppliers to consumers.