If personal taxes are increased by $10 billion, we can expect that consumers will reduce
A)spending by $10 billion.
B)spending by more than $10 billion.
C)spending by less than $10 billion.
D)saving by $10 billion.
E)saving by more than $10 billion.

Question

Quizplus · Accepted Answer

When personal taxes increase, consumers have less disposable income, leading to a reduction in spending. However, the reduction in spending is typically less than the full amount of the tax increase because consumers may also reduce their savings to maintain some level of consumption.

If Personal Taxes Are Increased by $10 Billion, We Can