An Increase in Government Purchases or a Decrease in Taxes

question 83

Multiple Choice

An increase in government purchases or a decrease in taxes, other things being equal, will tend to:

• A)increase interest rates and increase net exports.
• B)increase interest rates and decrease net exports.
• C)decrease interest rates and increase net exports.
• D)decrease interest rates and decrease net exports.

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Definitions:

Consolidated Financial Statements

Financial statements that combine the assets, liabilities, equity, income, expenses, and cash flows of a parent company and its subsidiaries.

Tax Rate

The rate at which taxes are levied on an individual or a corporation's income.

Consolidated Tax Returns

A single tax return filed by a parent company and its subsidiaries as one taxpayer to IRS, consolidating their tax liabilities.

Income Tax Liability

The total amount of income tax owed to the government within a fiscal year.