The Level of Crowding Out Associated with a Tax Cut

question 298

True/False

The level of crowding out associated with a tax cut will be smaller if the tax change has a supply-side effect than it will be if it only has a demand-side effect.

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Definitions:

Substitute

A product or service that can be used in place of another, offering consumers an alternative choice.

Equilibrium Price

The price point where market supply matches market demand, leading to a balanced market condition.

Pens

Writing instruments that use ink to leave a mark on surfaces, typically used for handwriting.

Pencils

Simple writing instruments consisting of a graphite core encased in a wooden or plastic barrel used for writing or drawing.