Raising the personal income tax rate rotates the consumption function ________ and ________ the tax-adjusted MPC.

Name: Raising the personal income tax rate rotates the consumption function ________ and ________ the tax-adjusted MPC.
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Question

Quizplus · Accepted Answer

Raising the personal income tax rate decreases disposable income, which shifts the consumption function downward and lowers the marginal propensity to consume (MPC) because individuals have less income to spend on consumption for each additional dollar earned.

Raising the Personal Income Tax Rate Rotates the Consumption Function