The Argument That the Primary Impact of the 1981 Tax

question 27

Multiple Choice

The argument that the primary impact of the 1981 tax cut was on aggregate demand is based on the fact that

• A) output did not rise sufficiently to offset the effect of the tax cuts on the size of the federal deficit.
• B) unemployment rose significantly after the tax cut, necessitating increased federal welfare.
• C) after the tax cut, the velocity of circulation of the money supply rose at a rapid rate.
• D) the inflationary pressures in the economy after the tax cut were greater than the pre-tax cut rate of inflation.
• E) the United States ran a balance of payments surplus for the first time in the post-Vietnam War era two years after the tax cut.

---

Definitions:

Sine

The angular relationship of the opposite side of a right triangle and the hypotenuse.

Opposite

Across from.

Hypotenuse

The longest side of a right-angled triangle, opposite the right angle, and determined by the square root of the sum of the squares of the other two sides.

Vectors

Quantities that have both magnitude and direction, represented by arrows in physics and mathematics.