Raising the tax rate lowers the tax-adjusted MPC.

Name: Raising the tax rate lowers the tax-adjusted MPC.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Raising the tax rate will reduce the disposable income of individuals, leading to a decrease in their consumption expenditure. This means that the marginal propensity to consume (MPC) will decrease, as people save more of their income and spend less. Therefore, the tax-adjusted MPC will be lower.

Raising the Tax Rate Lowers the Tax-Adjusted MPC