In the long run, a reduction in the corporate profits tax will lead to ________ profits in the corporate sector and ________ profits in the noncorporate sector.

Question

Quizplus · Accepted Answer

A reduction in the corporate profits tax decreases the tax burden on corporations, making it more attractive to invest in the corporate sector. This can lead to higher profits in the corporate sector as businesses potentially expand or invest more due to the lower tax rates. Additionally, as the corporate sector becomes more attractive for investment, resources might shift from the noncorporate to the corporate sector, potentially increasing profits in the noncorporate sector as well due to reduced competition or increased demand for services and goods provided by the noncorporate sector.

In the Long Run, a Reduction in the Corporate Profits