If Congress passed a one-time tax cut in order to stimulate the economy in 2014,and tax rate levels returned to their pre-2014 level in 2015,how should this tax cut affect the economy?
A)The tax cut would increase consumption spending less than would a permanent tax cut.
B)The tax cut would increase consumption spending more than would a permanent tax cut.
C)The tax cut would increase consumption spending by the same amount as would a permanent tax cut.
D)The tax cut would raise the price level in 2014.

Question

Quizplus · Accepted Answer

A one-time tax cut is not expected to have a long-term effect on consumers' disposable income or their expectations of future disposable income. Therefore, the increase in consumption spending would be less than what a permanent tax cut would generate.

If Congress Passed a One-Time Tax Cut in Order to Stimulate