Tax cuts
A) may have no effect, if people take account of future taxes.
B) always stimulate economic activity.
C) will surely make the government default on its debts.
D) cause the government to borrow less.
E) cause unemployment.

Question

Quizplus · Accepted Answer

Tax cuts may have no effect on stimulating economic activity if people take into account that the tax cuts are temporary and future taxes will need to increase to make up for the revenue lost. Additionally, the effectiveness of tax cuts depends on various factors such as the type of tax, the level of government spending, and the overall state of the economy. Therefore, it is not accurate to say that tax cuts always stimulate economic activity. Tax cuts can also lead to an increase in government borrowing, which may result in a default on its debts. However, it is not necessarily assured that tax cuts will cause the government to borrow less or cause unemployment.

Tax Cuts