The permanent income hypothesis implies that the effect of a temporary tax cut on economic activity
A) is greater than the effect of a permanent tax cut.
B) is the same as the effect of a permanent tax cut.
C) is smaller than the effect of a permanent tax cut.
D) can be greater than or smaller than the effect of a permanent tax cut, depending on how the tax cut affects the government.
Question 2
People demand money for all of the following reasons EXCEPT
A) it generates a rate of return. B) it is a medium of exchange to make payments.
C) it is a store of value. D) it can meet unplanned expenditures.
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