Figure 11-2

Which graph in Figure 11-2 best reflects a Keynesian's view of the impact of raising taxes on saving?
A) 1
B) 2
C) 3
D) 4

Question

Figure 11-2

Which graph in Figure 11-2 best reflects a Keynesian's view of the impact of raising taxes on saving?
A) 1 
B) 2 
C) 3 
D) 4

Quizplus · Accepted Answer

A Keynesian would believe that raising taxes would decrease consumption, which in turn would lead to a decrease in saving. This is illustrated by graph 2, where an increase in taxes leads to a decrease in disposable income, which leads to a decrease in consumption and ultimately a decrease in saving.

Figure 11-2 Which Graph in Figure 11-2 Best Reflects a Keynesian's View