What Is the Main Argument Which Explains Why the Data

question 1

Multiple Choice

What is the main argument which explains why the data do not show a positive relation between the deficit producing tax cuts in the early eighties savings rates?

• A) people will increase savings to "finance" debt repayment by future generations
• B) people will increase consumption to "finance" debt repayment by future generations
• C) savings is determined by uncertain events, the timing of future illnesses and death
• D) savings is determined by certain events, the timing of future illnesses

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Definitions:

Aggregate Demand

The total demand for all goods and services within a particular economy at a given overall price level and in a given time period.

Interest Rate

The percentage at which interest is paid by a borrower for the use of money they borrow from a lender, often expressed as an annual percentage rate (APR).

Multiplier

In macroeconomics, a factor that quantifies how an initial change in spending will affect total economic output.

Crowding-out Effects

The phenomenon where increased government spending leads to a reduction in private sector spending.