Why would a reduction in tax rates that was anticipated to be only temporary not cause nearly as large a supply-side response as one that was expected to be permanent? Does the same logic hold for how long other parts of the existing ground rules (e.g., regulations) will remain as they are now?

Why would a reduction in tax rates that was anticipated to be only temporary not cause nearly as large a supply-side response as one that was expected to be permanent? Does the same logic hold for how long other parts of the existing ground rules (e.g., regulations) will remain as they are now?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter24: Fiscal Policy

Section: Chapter Questions

Problem 10P

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Question

Why would a reduction in tax rates that was
anticipated to be only temporary not cause
nearly as large a supply-side response as one
that was expected to be permanent? Does the
same logic hold for how long other parts of the
existing ground rules (e.g., regulations) will
remain as they are now?

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