If We Lower Taxes Today but Raise Them in the Future,and

question 89

Multiple Choice

If we lower taxes today but raise them in the future,and if b = 1,

• A)household wealth rises because they save less.
• B)households will increase today's consumption.
• C)present wealth remains unchanged and consumption does not change.
• D)the government can rely on households to spend more today.
• E)saving today will fall and lifetime consumption rises.

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Definitions:

Work Sheet

A paper or electronic document used by accountants to compile and analyze financial information prior to preparing financial statements.

Net Income

The total earnings of a company after subtracting all expenses, including taxes and operating expenses.

Income Summary

An account used in the closing process that summarizes revenues and expenses for a specific period, facilitating the transfer of their net effect to capital or owner's equity.

Closing Entries

At the close of an accounting cycle, transactions are documented to move amounts from temporary accounts to those that are permanent.