Compared to a permanent reduction in tax rates, a temporary tax cut will generally
a. exert a larger impact on output and employment because its effects are immediate, long-lasting, and do not add much to the national debt.
b. exert a smaller impact on output and employment because the temporary cut will not exert much impact on long-term income or the incentive to earn.
c. exert a larger impact on output and employment because the temporary tax cut will lead to a larger budget deficit.
d. exert an identical impact on output and employment because the incentive effects will be the same regardless of whether the tax cut is temporary or permanent.
B
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Society faces a trade-off in all of the following situations except
A) when deciding who will receive the goods and services produced. B) when deciding how goods and services will be produced. C) when some previously unemployed workers find jobs. D) when deciding what goods and services will be produced.
An increase in the money supply in the Friedman-Lucas money surprise model
A) reduces aggregate output, raises the price level, and reduces the real interest rate. B) increases aggregate output, reduces the price level, and reduces the real interest rate. C) increases aggregate output, raises the price level, and reduces the real interest rate. D) reduces aggregate output, raises the price level, and raises the real interest rate.
The impact of declining stock prices in the U.S. during 2000-2006 on U.S. household wealth was at least partially offset by:
A. an increase in public saving. B. a decrease in the saving rate. C. an increase in the saving rate. D. increasing housing prices.
Which of the following would be most likely to cause the per capita income of less-developed countries to rise?
A. development of strong labor unions B. more rapid population growth C. investment expenditures that enhance the human capital of labor force participants D. an international minimum wage law