A significant example of a temporary tax cut was the one announced in 1992 by President George H. W. Bush. The effect of that tax cut on consumer spending and aggregate demand was
A)zero.
B)likely smaller than if the cut had been permanent.
C)likely about the same as if the cut had been permanent.
D)likely larger than if the cut had been permanent.

Question

Quizplus · Accepted Answer

Temporary tax cuts are generally believed to have a smaller impact on consumer spending and aggregate demand than permanent ones because consumers may save rather than spend the additional income, anticipating the tax cut's temporary nature.

A Significant Example of a Temporary Tax Cut Was the One