If Households View a Tax Cut as Temporary, Then the Tax

question 56

Multiple Choice

If households view a tax cut as temporary, then the tax cut

• A)has no effect on aggregate demand.
• B)has more of an effect on aggregate demand than if households view it as permanent.
• C)has the same effect as when households view the cut as permanent.
• D)has less of an effect on aggregate demand than if households view it as permanent.

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Definitions:

Pre-tax Cost

The cost of an investment or expense before the application of taxes, representing the gross expense.

Market Price

The rate at present for the purchase or sale of a service or asset.

Preferred Stock

A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock, often with dividends that are paid out before those to common shareholders.

Bonds Outstanding

The total amount of issued bonds that are currently held by investors and not yet redeemed.