Asked by Aspen Arellano on May 10, 2024
Verified
Which of the following correctly describes the effects of a decrease in net taxes?
A) Disposable income increases,consumption decreases,and saving decreases.
B) Disposable income increases,consumption increases,and saving increases.
C) Disposable income decreases,consumption increases,and saving increases.
D) Disposable income decreases,consumption decreases,and saving decreases.
E) There is no effect on either disposable income,consumption,or saving.
Net Taxes
The total taxes paid to the government after subtracting transfers and government spending directly beneficial to the taxpayer, such as social security or unemployment benefits.
Disposable Income
The finance households possess for setting aside savings and covering expenses, following income tax deductions.
Consumption
The use of goods and services by households.
- Master the idea of aggregate spending and its association with fiscal policy.
Verified Answer
MG
Mihret GizachewMay 13, 2024
Final Answer :
B
Explanation :
A decrease in net taxes means individuals and households have more disposable income. This increase in disposable income leads to an increase in both consumption and saving. Therefore, option B is correct.
Learning Objectives
- Master the idea of aggregate spending and its association with fiscal policy.