A Tax Cut Has a Smaller Impact on Aggregate Demand

question 96

Multiple Choice

A tax cut has a smaller impact on aggregate demand than an increase in government purchases of the same size because

• A)A portion of the tax cut is invested.
• B)A portion of the tax cut is saved.
• C)Tax cuts do not increase disposable income.
• D)The tax cut multiplier is equal to 1.

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Definitions:

Division of Labor

The allocation of different tasks to different people or groups in an organization or production process.

Proficient

Having a high level of skill or expertise in a particular area or activity.

Specialized Task

An organizational duty or responsibility that requires specific skills or expertise, often designed to be performed by individuals or teams with particular qualifications.

Precambrian

denotes the vast period of time before the Cambrian period, covering the formation of the Earth until about 541 million years ago.