Which of the following observations is true?
A)Increase in taxes shifts the consumption schedule upward.
B)Tax reductions increase equilibrium GDP.
C)Taxes reduce total spending directly.
D)Taxes do not have a multiplier effect on equilibrium GDP.

Question

Quizplus · Accepted Answer

Tax reductions increase disposable income, which in turn leads to an increase in consumption, leading to an upward shift in the aggregate expenditure line and an increase in equilibrium GDP.

Which of the Following Observations Is True