Which of the Following Best Explains Why the Federal Tax

question 91

Multiple Choice

Which of the following best explains why the federal tax rebates in 2008 and 2009 had almost no effects on aggregate demand?

• A)According to the permanent income hypothesis, those one-time tax rebates did not affect consumption because they did not change taxpayers' permanent income.
• B)According to the permanent income hypothesis, those one-time tax rebates did not affect consumption because taxpayers did not believe the rebates would occur.
• C)According to Ricardian equivalence theorem, those tax rebates did not affect aggregate demand because they were accompanied by more government spending.
• D)According to Ricardian equivalence theorem, those tax rebates did not affect aggregate demand because there were no direct expenditure offsets.

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