When consumption and saving are graphed relative to real GDP, an increase in personal taxes will shift
A) both the consumption and saving schedules downward.
B) both the consumption and saving schedules upward.
C) the consumption schedule upward and the saving schedule downward.
D) the consumption schedule downward and the saving schedule upward.

Question

Quizplus · Accepted Answer

An increase in personal taxes reduces disposable income, leading to a decrease in both consumption and saving, hence shifting both schedules downward.

When Consumption and Saving Are Graphed Relative to Real GDP