If We Compare the Effects on Aggregate Demand of a Temporary

question 45

Multiple Choice

If we compare the effects on aggregate demand of a temporary investment tax credit for firms and a temporary income tax cut for households, we realize that

• A)a temporary income tax cut is more effective since consumption is a larger portion of aggregate demand than investment
• B)neither one will change aggregate demand significantly since in both cases permanent rather than current income is important
• C)both will change aggregate demand significantly since individuals as well as firms want to take advantage of lower taxes while they can
• D)the personal income tax cut will increase aggregate demand while the higher tax credit will lower aggregate demand
• E)temporary investment tax credits will help to simulate aggregate demand but temporary income tax cuts most likely will not

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Definitions:

Narrative Competence

The ability to understand, interpret, and create stories and narratives, which is essential for effective communication and understanding in various contexts.

Understanding the Story

The process of comprehending the narrative, themes, and contexts within a piece of literature or situation.

Elaborating the Meaning

The act of providing detailed explanations or clarifications to deepen understanding of a topic.

Identifying Subplots

This refers to the process of recognizing secondary or supporting storylines in a narrative that run parallel to the main plot.