If Policymakers Cut Taxes Because They Perceive That Recession Is

Multiple Choice

If policymakers cut taxes because they perceive that recession is a major threat, a proponent of the new classical view will be most likely to argue that the tax cut is

A) highly appropriate because it will stimulate aggregate demand and, thereby, help to strengthen the economy.
B) highly inappropriate because it will exert a restrictive impact on aggregate demand, output, and employment.
C) not very important because the "demand stimulus effects" of the tax cut will be largely offset by additional borrowing and higher interest rates.
D) not very important because the "demand stimulus effects" of lower current taxes will be largely offset by the expectation of higher taxes in the future.