If Households View a Tax Cut as Being Temporary, How

question 114

Multiple Choice

If households view a tax cut as being temporary, how does the tax cut affect aggregate demand?

• A) It has no effect on aggregate demand.
• B) It has a stronger effect on aggregate demand than if households view the cut as permanent.
• C) It has the same effect on aggregate demand than if households view the cut as permanent.
• D) It has a weaker effect on aggregate demand than if households view the cut as permanent.

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