The Stimulus Strategy Behind Tax Cuts Will Only Be Effective

question 96

Multiple Choice

The stimulus strategy behind tax cuts will only be effective if Ricardian equivalence:

• A) holds, and people increase their spending.
• B) holds, and people save more.
• C) fails to hold, and people increase their spending.
• D) fails to hold, and people save more.

---

Definitions:

Cost of Merchandise Sold

The total cost incurred by a company to sell its products, including the cost of the goods themselves plus any additional expenses.

Sales Tax

A tax on sales or on the receipts from sales, typically added to the purchase price by the seller.

Gross Profit

The difference between revenue and the cost of goods sold before deducting overhead, payroll, taxation, and interest payments.

Selling Expenses

Expenses that are incurred directly in the selling of merchandise.