If business leaders expect the new Congress to lower the corporate profits tax, most likely this will cause business firms, ceteris paribus, to
A. increase investment because the lower corporate profits tax will increase the return on any investment.
B. plan to decrease investment in the future to compensate for the lower tax rate.
C. decrease investment because they would expect lower benefits from investment.
D. not change their investment plans because lower corporate profit taxes will not change the demand for their product.
Answer: A
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Most economists accept the need for a required pension system because
A. economists believe that saving is good for the soul. B. people will save less than is optimal knowing that they can rely on welfare, and people may not have the information necessary to calculate their correct level of savings. C. people will save less than is optimal knowing that they can rely on welfare. D. people may not have the information necessary to calculate their correct level of savings.
If the MPC is 0.75, the expenditure multiplier will be
A. 3.5. B. 4. C. 2. D. 3.
The relationship between planned consumption expenditures and the level of real disposable income is called
A. the investment function. B. the aggregate demand function. C. the consumption function. D. the savings function.
The J-curve effect refers to the observation that
A. the trade balance usually gets worse before it improves after a currency depreciation. B. GDP usually decreases before it increases after a currency appreciation. C. GDP usually decreases before it increases after a currency depreciation. D. the trade balance usually gets worse before it improves after a currency appreciation.