Final answer:
True, income increases equity through retained earnings, which can be used for reinvesting, and false, a loss decreases equity by reducing retained earnings.
Step-by-step explanation:
The statement that income increases equity (RE) is true, as income adds to the company's retained earnings, which is a component of shareholders' equity. Conversely, a loss decreases equity (RE) because it reduces the retained earnings available for reinvestment or distribution to shareholders. In business terms, equity represents the residual interest in the assets of an entity after deducting liabilities. When a company is profitable, it can choose to reinvest its profits as described, potentially leading to reinvesting in new capital, which can enhance productivity and promote growth. This process of reinvestment is crucial for a company to remain competitive and expand its operations. Therefore, income is fundamentally linked to a company's ability to grow through reinvesting.