Consider the following statements about the impact of taxes on the economy of India 1 It indir...........

Economic Affairs Tax System

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Consider the following statements about the impact of taxes on the economy of India?

1. It indirectly affects the level of investment in the economy.

2. Tweaking taxes can be counter-inflationary.

3. It has not effect on the foreign investments in the economy.

Which of these is/are true?

1 and 2

2 and 3

1 and 3

All of the above

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Explanation:

Level of investment depends upon the money available in the economy.

· Fiscal measures can be taken to either absorb the money from the market or to increase the flow of money in the market. Hence, taxes indirectly affect the level of investment in the country.

· Change in tax rates does have an effect on the foreign investment in the country. Very high taxes will be counterproductive for a foreign firm. Hence can make them averse of the investment and vice versa