Which of the following observations is t?
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

This observation states that a tax reduction shifts the consumption schedule upward, which implies that there is a positive relationship between tax changes and consumption. Option A states that tax changes have no impact on the consumption schedule, which is incorrect. Option C talks about the multiplier effect of taxes on GDP on the supply side, which is not relevant to the impact of taxes on the consumption schedule. Option D is also incorrect because tax increases would likely decrease consumption and, therefore, reduce equilibrium GDP.

Which of the Following Observations Is T