A change in tax rates is likely to affect individuals' behavior regarding consumption and saving if
A) the change is for one year only.
B) the change is not too big.
C) the change will not increase the budget deficit.
D) the change is permanent.

Question

Quizplus · Accepted Answer

A permanent change in tax rates provides individuals with a stable and predictable future after-tax income, which can influence their consumption and saving behavior. A one-year change may not have a significant impact, and a change that is not too big may not be enough to alter behavior. The effect on the budget deficit is not directly related to how individuals respond to the change in tax rates.

A Change in Tax Rates Is Likely to Affect Individuals