Question #80623
Complete the following sentence. Investment spending will...if the...decreases.
1)increase;tax rate
2)decrease;government spending
3)remain unchanged;level of income
4)remain unchanged;interest rate
1)increase;tax rate
2)decrease;government spending
3)remain unchanged;level of income
4)remain unchanged;interest rate
Expert's answer
Investment spending will increase if the tax rate decreases.
This is due to the fact that a reduction in taxes increases the disposable income that is distributed between savings and consumption. In an equilibrium economy, savings are equal to investment.
This is due to the fact that a reduction in taxes increases the disposable income that is distributed between savings and consumption. In an equilibrium economy, savings are equal to investment.
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