Compared to a Permanent Reduction in Tax Rates, a Temporary

question 153

Multiple Choice

Compared to a permanent reduction in tax rates, a temporary tax cut will generally

• A) exert a larger impact on output and employment because its effects are immediate, long-lasting, and do not add much to the national debt.
• B) exert a smaller impact on output and employment because the temporary cut will not exert much impact on long-term income or the incentive to earn.
• C) exert a larger impact on output and employment because the temporary tax cut will lead to a larger budget deficit.
• D) exert an identical impact on output and employment because the incentive effects will be the same regardless of whether the tax cut is temporary or permanent.

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Definitions:

Inventory Needed

The quantity of stock that a business requires to meet its upcoming production and sales needs.

Direct Labor

The labor costs directly attributable to the production of goods or services, typically wages for workers who manufacture a product or perform a service.

Lean Manufacturing

A systematic method for waste minimization within a manufacturing system without sacrificing productivity.

Business Philosophy

The underlying principles and values that guide the operations, decisions, and overall direction of a company.