If the Government Were to Simultaneously Cut the Personal Income

question 35

Multiple Choice

If the government were to simultaneously cut the personal income tax and the corporate profits tax, the equilibrium interest rate

• A)would fall.
• B)would rise.
• C)would be unaffected.
• D)might either rise or fall.

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Definitions:

Socially Efficient Outcome

An economic situation where resources are allocated in a way that maximizes the aggregate welfare of society.

Government Bureaucracies

Complex administrative structures and procedures established by governments to manage their functions and processes.

Profit Motive

The incentive that drives individuals or entities to engage in activities that they expect will yield financial gain.

Special-Interest Groups

Organizations that represent the interests of a specific group of people or industry, often lobbying government officials for policies beneficial to their members.