If Taxes Are Reduced with No Change in Government Spending

question 53

Multiple Choice

If taxes are reduced with no change in government spending, and people save all the money from the tax cut,

• A) the demand for loanable funds will increase and the interest rate will increase.
• B) the demand for loanable funds will increase and the interest rate will remain constant.
• C) the supply of loanable funds will increase and the interest rate will decrease.
• D) neither the demand nor the supply of loanable funds will change.

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Definitions:

Self-reinforcement

The process by which individuals reward themselves for reaching certain goals or exhibiting desirable behaviors, thus encouraging repeated action.

Personal Standards

Refers to the individual benchmarks or expectations one sets for themselves in various aspects of their lives, influencing behavior and self-assessment.

Achievement

The accomplishment of an aim or purpose, often recognized as the result of effort, skill, or courage.

Attentional Processes

The cognitive functions involved in selecting and focusing on specific stimuli while ignoring others.