A Tax Increase Has a Smaller Impact on the Economy

Multiple Choice

A tax increase has a smaller impact on the economy than does a decrease in government spending of the same magnitude because:

A) Congress drags its feet in passing tax increases.
B) consumers pay for part of the tax increase by reducing their saving.
C) tax changes have more of a direct impact on income than does an equivalent change in government spending.
D) fiscal policy is weaker than monetary policy.