If Transfer Payments and Autonomous Taxes Both Increase by Identical

question 63

Multiple Choice

If transfer payments and autonomous taxes both increase by identical amounts,

• A)equilibrium income will increase by the amount of the increase
• B)equilibrium income will increase by more than the increase
• C)equilibrium income will increase by less than the increase
• D)the change in equilibrium income will depend on the value of the MPC
• E)there will be no change in equilibrium income

---

Definitions:

Market-to-Book Ratio

The market-to-book ratio compares a company's market value (or capitalization) to its book value of equity, indicating how valued a company is in comparison to its accounting values.

Debt-Equity Ratio

The debt-equity ratio shows the comparative amount of shareholder equity and debt financing a company uses to support its assets.

Fully Depreciated

A state where a fixed asset has reached the end of its useful life and its book value is reduced to scrap value.

Profit Margin

A measure of a company's profitability, calculated by dividing net income by total revenues. It shows how much profit each dollar of sales generates.