Which of the Following Circumstances Is Likely to Exaggerate the Expected

question 58

Multiple Choice

Which of the following circumstances is likely to exaggerate the expected shift in an IS curve in response to a reduction in taxes?

• A) A perception that the tax change is temporary
• B) A perception that the tax change is permanent
• C) A prior anticipation of higher taxes throughout the foreseeable future
• D) A prior anticipation that taxes would not change in the foreseeable future
• E) The certain knowledge that nothing is certain but death and taxes

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Definitions:

Risk

The possibility of loss, damage, or any other undesirable event.

Uncertainty

A condition of limited knowledge where it is impossible to exactly describe existing states or future outcomes.

Cognitive Styles

The preferred way an individual processes information, reflecting differences in thinking and learning.

Problem-solving Style

An individual's preferred approach or strategy for resolving issues, challenges, or dilemmas.