When Consumers Receive Tax Rebates and Use Them to Pay

question 134

Multiple Choice

When consumers receive tax rebates and use them to pay down debt rather than to increase spending:

• A) the resulting fiscal stimulus will be much larger than the initial tax rebate.
• B) the resulting fiscal stimulus will be much smaller than the initial tax rebate.
• C) the resulting fiscal stimulus will be the same size as the initial tax rebate.
• D) it is impossible to say whether the resulting fiscal stimulus will be larger or smaller.

---

Definitions:

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity of that good that consumers are willing to buy.

Price Ceiling

A government-imposed limit on how high the price of a product or service can be charged in the market, aimed at protecting consumers from high prices.

Quantity Demanded

The amount of a product or service consumers are willing and able to purchase at a given price.

Quantity Supplied

The amount of a good or service that producers are willing and able to sell at a given price within a certain time period.