If consumers expect a tax cut to be temporary
A)the increase in consumption will be much larger than for a permanent tax cut.
B)the increase in consumption will be much smaller than for a permanent tax cut.
C)the decrease in consumption will be much smaller than for a permanent tax cut.
D)consumption remains unchanged.
E)the overall effects are much larger than for a permanent tax cut.

Question

Quizplus · Accepted Answer

If consumers expect a tax cut to be temporary, they will be less likely to change their long-term consumption and savings behaviors, resulting in a smaller increase in consumption compared to a permanent tax cut.

If Consumers Expect a Tax Cut to Be Temporary