A one-time cut in taxes
A)can result in inflation.
B)can result in a one-time increase in the price level, but cannot result in inflation.
C)can result in a one-time decrease in the price level, but cannot result in inflation.
D)will cause a dollar-for-dollar increase in the money supply.

Question

Quizplus · Accepted Answer

A one-time cut in taxes can lead to an increase in aggregate demand and a temporary increase in the price level. However, inflation is a sustained increase in the price level over time. Therefore, a one-time cut in taxes cannot result in inflation.

A One-Time Cut in Taxes