Compared to a Permanent Reduction in Tax Rates, a Temporary

Multiple Choice

Compared to a permanent reduction in tax rates, a temporary tax cut will generally

A) exert a larger impact on output and employment because its effects are immediate, long-lasting, and do not add much to the national debt.
B) exert a smaller impact on output and employment because the temporary cut will not exert much impact on long-term income or the incentive to earn.
C) exert a larger impact on output and employment because the temporary tax cut will lead to a larger budget deficit.
D) exert an identical impact on output and employment because the incentive effects will be the same regardless of whether the tax cut is temporary or permanent.