A Senator States: "We Need to Cut Taxes in Order

question 70

Multiple Choice

A senator states: "We need to cut taxes in order to increase incentives to work and produce, so that we can pull the nation out of this economic slump." A mainstream economist who is a critic of this policy would likely reply that:

• A) Rather than cutting taxes there should be a decrease in government spending to address the problem
• B) Rather than cutting taxes, monetary policy should become tighter to control the inflation rate
• C) Increasing government spending is a surer way to increase production and pull the nation out of this economic slump
• D) Cutting taxes will only reduce output further, and aggravate the situation

---

Definitions:

Periodic Inventory Method

An accounting approach where inventory values and cost of goods sold are determined at the end of an accounting period through physical inventory counts.

Purchases Discount

A reduction in the invoice price of goods, granted by the seller to the buyer for early payment within a specified time frame.

Gross Method

An accounting method for recording inventory purchases without deducting discounts at the time of purchase.

Periodic Inventory System

An inventory system that, at the end of each accounting period, calculates the cost of the unsold goods on hand by taking the cost of each unit times the number of units of each product on hand.