If Households View a Tax Cut as Being Temporary, How

question 94

Multiple Choice

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

• A)It has no affect on aggregate demand.
• B)It has more of an effect on aggregate demand than if households view it as permanent.
• C)It has the same effect on aggregate demand than if households view the cut as permanent.
• D)It has less of an effect on aggregate demand than if households view the cut as permanent.

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Definitions:

Profitability

The financial metric that measures the degree to which a company or project generates profit compared to its revenues, costs, or investments.

Market Consensus Value

The average value or price of a security as agreed upon by market participants, often considered as the most probable price in the marketplace.

Required Return

The minimum annual percentage earned by an investment that will induce individuals or companies to put money into a particular security or project.

Expected Growth Rate

The annual rate at which an investment, company revenue, or economy is expected to grow over a future period.