The effect of the February 2008 tax rebate on spending was reduced due to ________.
A)the simultaneous missteps in monetary policy
B)the negative impact of the policy on saving rates
C)the recognition that the rebate did not constitute a permanent change in income
D)the small size of the program

Question

Quizplus · Accepted Answer

The recognition that the rebate did not constitute a permanent change in income reduced its effect on spending. Even though people received a one-time rebate, they realized that it was not a permanent increase in their income, so they did not increase their spending as much as they would have with a permanent increase. A, B, and D do not accurately describe the reason for the reduced effect of the tax rebate on spending.

The Effect of the February 2008 Tax Rebate on Spending