Suppose the federal government wants to encourage businesses to increase investment spending.Which policy may be the most effective?
A)An increase in corporate income taxes
B)An increase in real interest rates
C)An increase in warnings of a coming recession
D)An increase in tax deductions for investment spending

Question

Quizplus · Accepted Answer

An increase in tax deductions for investment spending would directly incentivize businesses to increase their investment spending, as they would face lower tax liabilities for doing so. This would likely have a stronger effect than the other policy options, which may either discourage investment (such as the increase in corporate income taxes or real interest rates) or not have a direct effect on investment (such as warnings of a coming recession).

Suppose the Federal Government Wants to Encourage Businesses to Increase