If the Price Index for Capital Goods Is the Same

question 95

Multiple Choice

If the price index for capital goods is the same as the price index for other goods, an index of the real cost of capital for investment, in the absence of taxes, may be summarized as the:

• A) nominal interest rate plus the depreciation rate.
• B) real interest rate plus the depreciation rate.
• C) purchase price of a capital good multiplied by the sum of the nominal interest rate plus the depreciation rate.
• D) purchase price of a capital good multiplied by the sum of the real interest rate plus the depreciation rate.

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Definitions:

Child Tax Credit

A tax benefit in the United States designed to help families offset the cost of raising children by reducing their tax liability on a dollar-for-dollar basis.

AGI

An income calculation that includes all taxable income and is reduced by specific deductions, instrumental in determining tax obligations.

Foreign Taxes Paid

Taxes paid to a foreign government for income earned in that foreign country, which may be creditable or deductible on a U.S. tax return.

Itemized Deduction

Deductions that taxpayers can claim for certain personal expenses, instead of taking a standard deduction. These can include expenses for healthcare, taxes, interest, and gifts to charity.