What could explain why a decrease in taxes could lead to a less-than proportionate increase in output ?
A. Consumers may choose to save much of the tax cut in anticipation of having to pay higher taxes in the future.
B. As a result of diminishing returns to current consumption, consumers may choose to spread the extra spending over the long term rather than consuming the proceeds of a tax cut all at once.
C. A decrease in taxes will necessitate lower government outlays, thus largely offsetting the higher consumption expenditures of households.
D. All of the above.
E. A and B only
Answer ;
A. Consumers may choose to save much of the tax cut in anticipation of having to pay higher taxes in the future.
C. A decrease in taxes will necessitate lower government outlays, thus largely offsetting the
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