The American Recovery and Reinvestment Act was legislation that included temporary tax cuts designed to help pull

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The American Recovery and Reinvestment Act was legislation that included temporary tax cuts designed to help pull the U.S. economy out of the Great Recession by increasing consumer spending.

a. Show graphically how a tax cut changes the consumption function.

b. Some economists argued that the tax cuts would increase consumption more if they were permanent rather than temporary. Explain why a permanent tax cut might increase consumption more than a temporary tax cut.

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Principles Of Economics

ISBN: 9781319330156,9781319419769

2nd Edition

Authors: Betsey Stevenson, Justin Wolfers

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