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Fall, 2003 - Question five - at George Mason University What is the predictable impact on aggregate consumption of a one-time decrease in income taxes offering relief to all taxpayers but targeted more favorably at low income and high income households? In your answer refer to the following models: 1. * Keynesian consumption model; 2. * Life-Cycle hypothesis; 3. * Permanent income hypothesis

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  • MacroF03-5
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  • Fall, 2003 - Question five - at George Mason University What is the predictable impact on aggregate consumption of a one-time decrease in income taxes offering relief to all taxpayers but targeted more favorably at low income and high income households? In your answer refer to the following models: 1. * Keynesian consumption model; 2. * Life-Cycle hypothesis; 3. * Permanent income hypothesis
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  • Fall, 2003 - Question five - at George Mason University What is the predictable impact on aggregate consumption of a one-time decrease in income taxes offering relief to all taxpayers but targeted more favorably at low income and high income households? In your answer refer to the following models: 1. * Keynesian consumption model; 2. * Life-Cycle hypothesis; 3. * Permanent income hypothesis Discuss how the recent tax cut by the Republican Administration will affect short-term and long-term consumption in the United States. In your view, which of the three above-mentioned models is the most relevant in explaining the potential impact of the tax cut? Explain your reasoning.
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