Which of the following observations is true?
A)Tax changes have no impact on the consumption schedule.
B)Tax reduction shifts the consumption schedule upward.
C)Changes in taxes have a multiplier effect on equilibrium GDP on the supply-side.
D)Tax increases increase equilibrium GDP.

Question

Quizplus · Accepted Answer

Tax reduction shifts the consumption schedule upward, which increases autonomous consumption and leads to an increase in equilibrium GDP. Tax changes have a multiplier effect on the demand-side, not on the supply-side. Tax increases have a contractionary effect on the economy and reduce equilibrium GDP.

Which of the Following Observations Is True