The president of the hypothetical country of Accordia implements a temporary two-year tax cut on income taxes.According to the permanent-income hypothesis,these tax cuts would represent ________ income and would have ________ on consumption.
A) permanent; a significant impact
B) permanent; very little impact
C) transitory; a significant impact
D) transitory; very little impact

Question

Quizplus · Accepted Answer

According to the permanent-income hypothesis, temporary income changes are considered transitory and do not have a significant impact on consumption. Therefore, the best choice is D - transitory income and very little impact on consumption.

The President of the Hypothetical Country of Accordia Implements a Temporary