In the Event Consumers Expected a Tax Cut in the Future

question 18

Multiple Choice

In the event consumers expected a tax cut in the future, forward-looking consumption behavior on their part would bring about

• A) a leftward shift of the IS curve as they anticipated higher future budget deficits.
• B) a leftward shift of the IS curve in response to an expected decrease in government future benefits.
• C) a rightward shift of the IS curve since they perceive their lifetime disposable income to have increased.
• D) a rightward shift of the IS curve in response to an expected decrease in government future benefits.
• E) a leftward shift of the IS curve since they perceive their lifetime disposable income to have increased.

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Definitions:

Mental Process

Operations of the mind involving thinking, perceiving, remembering, and understanding, often influencing behavior.

Investigator

A person who carries out a systematic inquiry or study to discover facts or information.

Illusory Correlation

is the perception of a relationship between two variables even when no such relationship exists.

Premonition

A strong feeling that something is about to happen, especially something unpleasant.