单选题
The federal government seeks ways to increase the total investment component of GDP. In response to the government's objective, economist Scan Zadora recommends that the federal government lower taxes on interest earned on savings accounts. Zadora's colleague, Timothy Smythe, recommends that the federal government reduce its budget deficit.
Regarding the statements made by Zadora and Smythe:
Zadora Smythe
①A. Correct Incorrect
②B. Correct Correct
③C. Incorrect Ineorrect
A. ①B. ②C. ③
【正确答案】
B
【答案解析】Income tax reductions on interest income cause savings and investments to increase. Lower taxes on savings make saving more attractive. Therefore, Zadora is correct. Smythe is also correct. Budget deficits (expenditures exceed tax revenues) equate to negative savings by the government, detracting from total investment. A reduction in the government deficit, as recommended by Smythe, indicates that the government's negative savings is lessening, thereby contributing positively to total investment. Also, as the government reduces its deficit, it will likely lead to lower interest rates and to a smaller "crowding out effect" of private investment.