If the Government Levies a One-Time Temporary Tax on the Young

question 49

Multiple Choice

If the government levies a one-time temporary tax on the young and gives the proceeds to the elderly, and both generations follow the life-cycle consumption pattern but are not altruistically linked:

• A) both the young and the old will consume more.
• B) there will be a net increase in overall consumption.
• C) there will be a net decrease in overall consumption.
• D) there will be no change in overall consumption.