A one-time tax rebate,which is not expected to be extended in future years,will
A)have a moderately positive effect on consumption and aggregate demand.
B)have no effect on consumption and aggregate demand.
C)have a significant positive effect on consumption and aggregate demand,with aggregate demand growing by a multiple of the tax rebate.
D)increase aggregate supply and aggregate demand.

Question

Quizplus · Accepted Answer

A one-time tax rebate can lead to a moderately positive effect on consumption and aggregate demand. This is because consumers may use the money from the rebate to increase their spending, leading to increased demand for goods and services. However, this effect may not be very significant if the amount of the rebate is small. Furthermore, if consumers believe that the rebate is a one-time event and not likely to be repeated in future years, they may not change their spending behavior significantly. Therefore, the effect on aggregate demand may be limited.

A One-Time Tax Rebate,which Is Not Expected to Be Extended