Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 34 - Part XII - The Influence of Monetary and Fiscal Policy on Aggregate Demand - Problems and Applications - Page 768: 4

Answer

The policy that will boost spending more will be the permanent tax cut. The permanent tax cut will also have the greater output on aggregate demand.

Work Step by Step

A temporary (one year) tax cut would not increase the spending of consumers by much (as it it a temporary change). A permanent tax cut would allow consumers to think that their finances have improved considerably, which would have a greater impact on spending and aggregate demand (compared to a one year tax cut).
Update this answer!

You can help us out by revising, improving and updating this answer.

Update this answer

After you claim an answer you’ll have 24 hours to send in a draft. An editor will review the submission and either publish your submission or provide feedback.