A Greater Reduction in the Government's Deficit Spending Would Stimulate

question 95

Multiple Choice

A greater reduction in the government's deficit spending would stimulate investment if it were achieved by which of the following changes, ceteris paribus?

• A) an increase in the income tax rate on interest payments
• B) a decrease in the income tax rate on transfer payments
• C) an increase in sales taxes on consumption goods
• D) a decrease in sales taxes on consumption goods

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Definitions:

Economic Profits

The difference between a firm's total revenues and its total costs, including both explicit and implicit costs, representing a measure of efficiency and profitability.

Price Discrimination

A pricing strategy where a seller charges different prices for the same product or service to different customers, based on what the seller believes the customers will pay.

Antitrust Regulations

Laws designed to enhance competition in the market by preventing monopolistic practices and promoting fair and free competition.

Nondiscriminating Monopolist

A monopolist who charges all consumers the same price for its product, without any price discrimination.