A Decrease in Government Purchases or an Increase in Taxes

question 58

Multiple Choice

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

• A)​increase interest rates and decrease investment as a result.
• B)​increase interest rates and increase investment as a result.
• C)​decrease interest rates and decrease investment as a result.
• D)​decrease interest rates and increase investment as a result.

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Definitions:

After-Tax Net

The amount of money left after all applicable taxes have been deducted from gross income or profit.

Cash Inflow

The total amount of money being transferred into a business, project, or financial product during a specific period, often resulting from sales, financing, or investments.

Incremental Sales

The additional revenue generated from a particular marketing or sales activity, beyond the ordinary sales figures.

Cash Operating Expenses

Expenses that a company must pay out in cash, such as salaries, utilities, and rent, related to its operational activities.