How do permanent tax cuts shift the AD curve compared with temporary tax results?
A) Permanent tax cuts shift the AD curve farther to the right than temporary tax cuts do.
B) Permanent tax cuts shift the AD curve less to the right than temporary tax cuts do.
C) Permanent tax cuts shift the AD curve farther to the left than temporary tax cuts do.
D) Permanent tax cuts shift the AD curve less to the left than temporary tax cuts do.

Question

Quizplus · Accepted Answer

Permanent tax cuts have a larger impact on disposable income and consumer spending than temporary tax cuts, thus leading to a greater shift in the AD curve. Temporary tax cuts have a smaller impact on disposable income and consumer spending, leading to a smaller shift in the AD curve.

How Do Permanent Tax Cuts Shift the AD Curve Compared