A Reduction in the Net Tax Rate Might Lead to an Increase

question 32

Multiple Choice

A reduction in the net tax rate might lead to an increase in the growth rate of potential output if

• A)the simple multiplier is large.
• B)the tax cuts stimulate private investment.
• C)firms are operating at their normal capacity.
• D)households are not forward looking.
• E)the marginal propensity to consume is large.

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Definitions:

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