You Observe That When Stock Prices Rise, Interest Rates Soon

question 161

Multiple Choice

You observe that when stock prices rise, interest rates soon fall, and therefore conclude that higher stock prices lead to lower interest rates. This would be an example of:

• A) The fallacy of composition
• B) Tradeoff among economic goals
• C) The post hoc fallacy
• D) The use of loaded terminology

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Definitions:

Marginal Tax Rate

The rate at which the next dollar of taxable income is taxed, indicating the impact of the last dollar earned on one's tax obligations.

Tax Shield

The reduction in income taxes that results from taking an allowable deduction from taxable income.

CCA Class

Refers to the classification system for capital cost allowance purposes in Canada, determining the rate at which assets can be depreciated for tax purposes.

Marginal Tax Bracket

The tax rate that applies to the final dollar of taxable income for a person or organization.