If people expected that a ﬁscal policy in the form of a tax cut was temporary, then this policy's effect on the economy would tend to be
A) stronger.
B) weaker.
C) the exact opposite of what was intended.
D) as the multiplier effect would predict.

Question

Quizplus · Accepted Answer

If people expect a tax cut to be temporary, they may not alter their behavior much as they anticipate the tax cut will end soon. This means that the impact of the tax cut on the economy is likely to be weaker than if people believed it to be permanent.

If People Expected That a ﬁScal Policy in the Form