Corporate income is taxed twice—once in the form of corporate income tax and the second time when the owner must pay income tax on dividends. What are the effects of this double taxation?
What will be an ideal response?
In equilibrium, investors do not lose by choosing to invest in a corporation. The risk-adjusted return must be the same for both types of investments. Corporations will be forced to avoid some investment opportunities that partnerships or proprietorships can consider. By avoiding opportunities with a positive but low expected return, corporations earn a higher return on their funds. Further, the prices of other investment opportunities will adjust to reflect the double taxation of corporate income. One can expect, therefore, no difference in the return on either type of investment.
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When the price ceiling on eggs is lifted, there is a shortage of eggs in the market
a. True b. False Indicate whether the statement is true or false
Dividend refers to
a. a corporation's regular payments to lenders. b. part of the revenue given to stockholders of a corporation. c. a lender's legal claim on the assets of a bankrupt corporation. d. a prepayment of a corporation's legal obligation.
When a variable that is not named on either axis of a graph changes, we read the change as a movement along the curve
a. True b. False Indicate whether the statement is true or false
In an economy with persistent inflation,
A. real GDP will grow faster than nominal GDP. B. nominal GDP will grow faster than real GDP. C. nominal and real GDP will grow at the same rate. D. nominal and real GDP will both fall.