Suppose consumers save 3 percent of their incomes. If the government collects 1 dollar in taxes from each taxpayer, private saving will ________ per taxpayer.

Question

Quizplus · Accepted Answer

When the government collects 1 dollar in taxes, consumers have 1 dollar less to save. Since they save 3 percent of their income, their saving will decrease by 3 percent of 1 dollar, which is 3 cents.

Suppose Consumers Save 3 Percent of Their Incomes