If personal income tax rates are decreased in an attempt to stimulate spending, we should expect to see
A)an increase in consumption and an increase in GDP.
B)an increase in consumption and a decrease in GDP.
C)a decrease in consumption and a decrease in GDP.
D)a decrease in consumption and an increase in GDP.

Question

Quizplus · Accepted Answer

If personal income tax rates are decreased, people will have more disposable income, which will result in increased consumption. This increase in consumption will lead to an increase in GDP, as businesses will need to produce more goods and/or services to meet the higher demand. Therefore, option A is the correct answer.

If Personal Income Tax Rates Are Decreased in an Attempt