-The preceding diagram shows that a(n)
A) decrease in the tax rate results in a desire to spend less out of each level of GDP.
B) decrease in the tax rate leads to an equilibrium in which GDP diverges from intended spending.
C) decrease in the tax rate induces an increase in the equilibrium value of GDP.
D) increase in the tax rate induces an increase in the equilibrium value of GDP.
E) increase in the tax rate causes a decline in government expenditures.

Question

-The preceding diagram shows that a(n)
A) decrease in the tax rate results in a desire to spend less out of each level of GDP. 
B) decrease in the tax rate leads to an equilibrium in which GDP diverges from intended spending. 
C) decrease in the tax rate induces an increase in the equilibrium value of GDP. 
D) increase in the tax rate induces an increase in the equilibrium value of GDP. 
E) increase in the tax rate causes a decline in government expenditures.

Quizplus · Accepted Answer

A decrease in the tax rate increases disposable income, leading to higher consumption and investment, which in turn increases the equilibrium value of GDP.

-The Preceding Diagram Shows That A(n)