Why Do Permanent Tax Cuts Have a Greater Impact on Consumption

question 70

Multiple Choice

Why do permanent tax cuts have a greater impact on consumption than temporary tax cuts?

• A)Permanent tax cuts have a greater effect on expected long-run inflation.
• B)Permanent tax cuts are perceived as minor while temporary tax cuts are larger and more effective.
• C)Permanent tax cuts cause movement along the consumption function, while temporary tax cuts shift the consumption function.
• D)Permanent tax cuts affect expectations of long-run income more than temporary tax cuts.

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Definitions:

Production Areas

Specific sections within a manufacturing or production facility where goods are made or assembled.

Single Plantwide Rate

An overhead absorption rate that applies the same overhead costs to all products or services regardless of the actual overhead each consumes.

Multiple Production Department Rates

The use of different overhead application rates for various departments within a manufacturing facility to more accurately assign costs.

Activity-Based Costing

A costing method that assigns costs to products and services based on the resources they consume.