Which is more likely to stimulate aggregate demand in a timely manner?
a. a tax cut, because households will increase their consumption by the full amount of their tax reduction
b. a tax cut, because disbursement can take place quickly while spending increases are generally spread out over several years
c. a spending increase, because disbursement can take place quickly while a tax cut will be spread out over several years
d. a spending increase, because it can be easily reversed once the economy has recovered
B
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If each taxpayer is obliged to pay the same tax—a fixed sum of money—then the tax is
a. progressive b. proportional c. income based d. poll or head based e. excise based
An income tax in which the average tax rate is the same for all taxpayers would be considered a
a. progressive tax. b. regressive tax. c. distortion-free tax. d. proportional tax.