Suppose in Some Country That the First $5,000 of Interest

question 27

Multiple Choice

Suppose in some country that the first $5,000 of interest income is exempt from income tax.If the government then removed this exemption

• A)the interest rate and investment would rise.
• B)the interest rate would rise and investment would fall.
• C)the interest rate would fall and investment would rise.
• D)the interest rate and investment would fall.

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Definitions:

Common Stock

A type of equity security that represents ownership in a company, with rights to vote and share in dividends.

Statement of Financial Position

Another term for the balance sheet, detailing a company's financial status including assets, liabilities, and equity at a specific point in time.

ROA

Return on Assets; a profitability ratio that measures how efficiently a company can manage its assets to produce profits during a period.