How does an increase in taxes affect the expenditure schedule?
A)It causes movement to the left along the schedule.
B)It causes the schedule to shift upward.
C)It causes movement to the right along the schedule.
D)It causes the schedule to shift downward.

Question

Quizplus · Accepted Answer

An increase in taxes reduces disposable income, leading to a decrease in consumer spending. This results in the expenditure schedule shifting downward, as overall spending at each level of income is lower.

How Does an Increase in Taxes Affect the Expenditure Schedule