The higher the level of inflation, the stronger the impact on real GDP of reductions in the personal income tax.

Name: The higher the level of inflation, the stronger the impact on real GDP of reductions in the personal income tax.
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Question

Quizplus · Accepted Answer

Higher levels of inflation can erode the real value of tax reductions, making them less effective in stimulating consumer spending and, consequently, having a weaker impact on real GDP growth.

The Higher the Level of Inflation, the Stronger the Impact