A Tax Change Is a Determinant of the Size of the Shift

question 20

Multiple Choice

A tax change is a determinant of the size of the shift in the aggregate demand curve.The shift in the aggregate demand curve will be affected by

• A)households' perceptions about whether the tax change is on income or on goods.
• B)households' perceptions about whether the tax change is local or national.
• C)households' perceptions about whether the tax change is good or bad.
• D)households' perceptions about whether the tax change is permanent or temporary.

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Definitions:

Interest Charges

The cost incurred by an entity for borrowing funds; these are often calculated as a percentage of the principal amount loaned or the outstanding balance.

Compensating Balance

A minimum bank account balance that a borrower must maintain as part of a loan agreement, often used to offset the cost of the loan.

Deficit Financing

The practice of funding government spending through borrowing rather than through taxation, leading to a government deficit.

Interest Charges

The charge applied by a lender on a borrower for asset utilization, indicated as a percentage of the principal value.