00:01
Consider two policies, a tax cut that lasts for only one year and a tax cut that is expected to be permanent, which policy will stimulate greater spending by consumers and which policy will have the greater impact on aggregate demand.
00:16
A tax cut is intended to induce consumer spending by increasing the disposal income at hand, thereby increasing aggregate demand.
00:24
However, the behavior of a consumer on increasing spending demands on the type of a tax cut.
00:29
In other words, whether it's going to be a permanent cut or a temporary cut, adjustment.
00:34
A tax cut for one year or temporary tax cut does not affect consumer spending substantially.
00:41
As consumers perceive this is a short -term change, they do not see the decrease in taxes a substantial increase in income because they know it's temporary.
00:50
Therefore, they do not fully spend the additional disposable income that is generated due to a tax cut...
