Question

The United States government has decided to issue federal income tax rebates to taxpayers. What is the MOST LIKELY goal of these rebates?

A) increased consumer spending
B) increased transfer payments
C) reduction in the employment rate
D) a sharp reduction in the following year's military budget

Answer 1

The most likely goal of tax rebates is to stimulate the economy. The theory is that if you give cash to a bunch of people, they're likely to go out and spend that cash. By buying products, they transfer money to various businesses, who are then more likely to hire new people, thereby creating jobs.In practice, this doesn't always work perfectly, since people don't always use the money to buy things—they may save it, use it to pay off debt. They may also buy imported products, which can help foreign businesses more than it helps the local economy. Still, the theory is that tax rebates stimulate economic growth.