A Tax Increase Has a Smaller Impact on the Economy

question 27

Multiple Choice

A tax increase has a smaller impact on the economy than does a decrease in government spending of the same magnitude because

• A) Congress is slow in passing tax increases.
• B) consumers pay for part of the tax increase by reducing their savings.
• C) tax changes have more of a direct impact on income than does an equivalent change in government spending.
• D) fiscal policy is weaker than monetary policy.

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Definitions:

Reasonable Person Standard

A legal standard used to determine how an average person would responsibly act in certain situations, applying an objective perspective.

Express Condition

A clearly stated, specific condition in a contract that must be met for the performance of the contract to be required or for a party to fulfill its obligations.

Implied Condition

A legal term referring to a term or condition not expressly stated in a contract but assumed to be included by necessity or by the nature of the agreement.

Materially Breach

A significant failure to perform one's duties under a contract that results in harm to the other party and provides grounds for termination of the agreement.