A Temporary Tax Cut Is Not Likely to Be Effective

question 122

Multiple Choice

A temporary tax cut is not likely to be effective in stimulating aggregate demand if:

• A)the tax cut is large.
• B)the MPC is relatively high.
• C)the economy experiences a contractionary gap.
• D)the short-run aggregate supply curve is relatively flat.
• E)people based consumption decisions on their level of permanent income.