If Congress Passed a One-Time Tax Cut in Order to Stimulate

question 64

Multiple Choice

If Congress passed a one-time tax cut in order to stimulate the economy in 2010,and tax rate levels returned to their pre-2010 level in 2011,how should this tax cut affect the economy?

• A) Households on average would save an amount equal to the tax cut.
• B) The tax cut would stimulate spending by households.
• C) The tax cut would shift the aggregate demand curve to the right.
• D) The tax cut would raise the price level in 2010.

---

Definitions:

Sport-Utility Vehicle

A class of vehicle that combines elements of road-going passenger cars with features from off-road vehicles, like increased ground clearance and four-wheel drive.

Personal Fable

A cognitive distortion encountered in adolescence, making individuals believe they are unique, invincible, and not understood by others.

Moral Judgments

Decisions or opinions about what is right and wrong, typically reflecting personal values or societal standards.

Imaginary Audience

is a psychological concept where an individual believes that his or her actions are the focus of other people's attention and interest.