Why Is It Important That Consumers Respond Differently to Temporary

question 18

Multiple Choice

Why is it important that consumers respond differently to temporary and permanent increases in their incomes?

• A) This implies that consumption will be highly sensitive to temporary changes in income.
• B) This implies that a temporary tax cut will have a larger effect than a permanent one on current consumption.
• C) this tells us that the timing of income increases for consumers is irrelevant.
• D) this has implications for the relative effects of temporary and permanent tax cuts.

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Definitions:

Wage Expense

The total cost incurred by a company for employee services, including salaries, wages, bonuses, and other compensation.

Wages Payable

An account representing the total amount owed to employees for work performed that has not yet been paid.

Cash Outflows

Money that is spent or invested, flowing out of a business or individual's account.

Accounts Receivable

Money owed to a business by its customers for goods or services that have been delivered but not yet paid for.