In an Effort to Avoid Recession, the Government Implements a Tax

question 42

Multiple Choice

In an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households. We would expect this to

• A) affect neither aggregate supply nor aggregate demand.
• B) increase aggregate demand.
• C) reduce aggregate demand.
• D) reduce aggregate supply.

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Definitions:

Innovative Product

A new or significantly improved good or service that offers unique benefits or solves problems in a novel way.

Brand-Name Recognition

The extent to which a consumer can accurately identify a brand based on visual or auditory cues.

Trade Secrets

Confidential business information that provides an enterprise a competitive edge, such as formulas, practices, designs, instruments, or patterns.

Inverted-U Theory

suggests that there is an optimal level of some variable, beyond which its effect starts to decline or become negative.