Refer to the information provided in Figure 32.1 below to answer the question(s) that follow. Figure 32.1Refer to Figure 32.1. A cut in tax rates will decrease tax revenue if the economy moves from Point

The velocity of money is the:

a. number of times per year each dollar is used to transact an exchange. b. rapidity of price increases during inflation. c. number of times the price level increases during a year. d. time it takes for checks to clear banks. e. number of times per year each product is purchased during the year.

Which of the following statements best describes an effect of tax cuts?

a. When the economy is doing extremely well, tax cuts may shift AD so far to the right as to generate inflationary pressures, with little gain to GDP. b. When the economy is doing extremely well, tax cuts may shift AD so far to the right as to generate inflationary pressures, with considerable gain to GDP. c. When the economy is doing extremely well, tax cuts may shift AD so far to the left as to generate inflationary pressures, with little gain to GDP. d. When the economy is doing extremely well, tax cuts may shift AD so far to the left as to generate inflationary pressures, with considerable gain to GDP.