Consider a Tax Cut Which Affects Not Only Consumer Disposable

question 292

Multiple Choice

Consider a tax cut which affects not only consumer disposable income,but also after-tax earnings from labor supplied to labor markets and from financial assets acquired through saving.In the long run we would expect this tax cut to

• A)decrease both the price level and increase real GDP.
• B)increase both the price level and the level of real GDP.
• C)increase the level of real GDP.
• D)increase the price level.