Question

True or False: A tax cut that will last for only one year will have a greater impact on aggregate demand than a tax cut that is expected to be permanent. True False

Answer 1

A tax cut that will last for only a year will not have a huge effect on the aggregate demand as the aggregate demand increases only when the tax cut is permanent.

The given statement is false.

What is a tax?

A tax is a liability imposed on the taxpayer to pay a specified sum to the government based on the income they have earned in the previous year.

When the cutting of taxes becomes permanent in the country, then the citizens can start to acquire more which will increase the spending. The families will expect that the tax cuts are for the longer term which now induces them to buy and spend more and also act as an addition to their incomes. This whole impact would eventually lead to rising in aggregate demand.

Therefore, the demand increases when the tax cuts are permanent rather than when tax cuts are for only one year.

Learn more about the tax cut policies in the related link:

brainly.com/question/13924294

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