Lowering the corporate income tax rate ________ the user cost of capital,which ________ investment.

Question

Quizplus · Accepted Answer

Lowering the corporate income tax rate reduces the burden on firms, making investing more profitable with the same amount of capital. The User cost of capital is the interest rate or rate of return required to justify an investment. As the tax rate goes down, the user cost of capital goes down, resulting in more investments. Therefore, Option D is the correct answer: lowering the corporate income tax rate stimulates investment.

Lowering the Corporate Income Tax Rate ________ the User Cost