Figure 11-3 -In Figure 11-3, which line represents the change in the consumption schedule caused by a cut in fixed taxes? A)C₁ in graph (a) B)C₂ in graph (a) C)C₁ in graph (b) D)C₂ in graph (b)

Question

Quizplus · Accepted Answer

In graph (a), the line C₂ represents the change in consumption caused by a cut in fixed taxes. This is because the consumption schedule shifts upward due to an increase in disposable income resulting from the tax cut. The other three lines do not show an upward shift in the consumption schedule. In graph (b), neither line represents the change in consumption caused by a cut in fixed taxes; they both show the effect of a change in interest rates.

Figure 11-3 ​

Figure 11-3