In which of the following ways does government affect the consumption component of planned aggregate expenditures?
A)Through net taxes,which change disposable income
B)By purchasing goods and services,which increase consumption
C)By using subsidies to encourage firms to invest
D)By reducing the interest rate to encourage firms to invest
E)By producing public goods

Question

Quizplus · Accepted Answer

The government affects the consumption component of planned aggregate expenditures through net taxes, which change disposable income. When the government levies taxes on households, their disposable income decreases, and they have less money to spend on consumption. Conversely, if the government lowers taxes or provides tax rebates, disposable income increases, which can boost consumption.

In Which of the Following Ways Does Government Affect the Consumption