Practice mode Macroeconomic Policy Tools

Which of these statements about taxes is correct?

Correct answer C. A permanent change in taxes has a greater effect on aggregate demand than a temporary change in taxes

Explanation

Households base spending on expected long-term income. A permanent tax cut raises that expected income substantially, while a temporary one adds little, so the permanent change shifts consumption and demand more.

Report a problem

Answer checked 11 October 2026 How we write and check questions

Tip: press A, B, C or D to answer, and N for the next question.

Which of these statements about taxes is correct?

Discussion

Have a question about this answer? Cancel reply

Which of these statements about taxes is correct?

More Macroeconomic Policy Tools questions

Higher government purchases raise some people’s incomes, and they spend part of that extra income on more consumer goods. What does this illustrate?

Which statement about stabilisation policy is NOT true?

Which sequence best explains how an increase in the money supply shifts the aggregate demand curve?

On a graph with the interest rate on the vertical axis and the quantity of money on the horizontal axis, what does a rise in the interest rate do?

Discussion

Have a question about this answer? Cancel reply