Which of the following is a way in which business taxes can positively affect an economy?

• A. They discourage all forms of investment and innovation.
• B. They provide revenue for public goods and services, which can enhance productivity and economic growth.
• C. They always reduce consumer demand by increasing prices.
• D. They eliminate the need for government spending.

Answer: (B)

Verified step by step guidance

1. Understand the role of business taxes in an economy: Business taxes are payments made by firms to the government, which can influence economic activities in various ways.
2. Recognize that while taxes can sometimes discourage investment by increasing costs, they also generate government revenue that can be used for public goods and services.
3. Identify public goods and services as resources like infrastructure, education, and security that benefit the overall economy and can enhance productivity.
4. Connect how government spending funded by business taxes on these public goods and services can lead to improved economic growth by supporting businesses and workers.
5. Conclude that the positive effect of business taxes lies in their ability to provide necessary funding for public investments that support long-term economic development.