If households base their consumption spending on permanent income, then a temporary tax increase will cause a decrease in consumption.

Name: If households base their consumption spending on permanent income, then a temporary tax increase will cause a decrease in consumption.
Brand: Quizplus
Rating: 4.9 (58 reviews)

Question

Quizplus · Accepted Answer

If households base their consumption on permanent income, they are likely to view a temporary tax increase as having little effect on their long-term income, so they may not significantly change their consumption.

If Households Base Their Consumption Spending on Permanent Income, Then