All else equal,a decrease in effective tax rate will lead to
A)a fall in the desired investment.
B)an increase in the interest rate.
C)an increase in the desired investment.
D)an increase in inventory.

Question

Quizplus · Accepted Answer

When the effective tax rate decreases, firms have more after-tax profit, which increases their ability to invest in capital projects. The increase in after-tax profit, leads to an increase in the desired investment.

All Else Equal,a Decrease in Effective Tax Rate Will Lead