A cut in taxes, other things being equal, will:
A)increase interest rates and consequently decrease private investment.
B)increase interest rates and consequently increase private investment.
C)decrease interest rates and consequently decrease private investment.
D)decrease interest rates and consequently increase private investment.
E)decrease interest rates and consequently increase consumer spending.

Question

Quizplus · Accepted Answer

A cut in taxes increases disposable income, leading to higher demand for goods and services. This increased demand can lead to higher interest rates as the demand for money increases. Higher interest rates can make borrowing more expensive, potentially decreasing private investment.

A Cut in Taxes, Other Things Being Equal, Will