Allowing the deduction of depreciation allowances ___________ for a given level of investment; taxing corporate investment ___________ for a given level of investment.

Question

Quizplus · Accepted Answer

Allowing the deduction of depreciation allowances lowers the marginal cost of investment because it reduces the taxable income of a company, thereby reducing the amount of tax payable. Taxing corporate investment, on the other hand, lowers the marginal benefit of investment because the after-tax return on investment is reduced.

Allowing the Deduction of Depreciation Allowances ___________ for a Given