In which of the following years was a tax cut ineffective in stimulating aggregate demand?
A)1964
B)1975
C)1981
D)1999

Question

Quizplus · Accepted Answer

A tax cut in 1975 was ineffective in stimulating aggregate demand because the economy was in a period of stagflation, with high inflation and high unemployment. The tax cut did not increase consumer spending or business investment because people were more concerned with rising prices than with increasing their purchases or investments. In fact, the tax cut may have contributed to increases in inflation and interest rates, further dampening economic growth.

In Which of the Following Years Was a Tax Cut