Which of the Following Is True If the Government Cuts

question 100

Multiple Choice

Which of the following is true if the government cuts taxes in a way that reduces marginal tax rates as opposed to a way that does not reduce marginal tax rates if the impact on tax revenues is the same in both cases?

• A)Both actions will exert the same impact on aggregate supply and demand
• B)Lower marginal tax rates will increase the incentive to earn income and, thereby, stimulate aggregate supply.
• C)Both cases will increase people's incentive to save in the expectation of higher future taxes and, thereby, offset the stimulus effect of lower taxes.
• D)Interest rates will increase if marginal tax rates are lowered, whereas they will decrease if marginal tax rates are left unchanged.
• E)Interest rates will increase if marginal tax rates are lowered, whereas they will decrease if marginal tax rates are left unchanged

---

Definitions:

Psychopathology

The study of abnormal thoughts, feelings, and behaviors that may be indicative of mental illness.

Abnormal Behavior

Actions or behaviors that deviate significantly from what is considered typical or normal within a population or society.

Specializing

Focusing on a particular area of study or work, developing expertise within a specific domain.

Social Norm Deviance

Actions or behaviors that violate the unwritten rules or expectations of society or a social group.