Which of the following is true of the disposable income of the households?
A) An increase in the average price level lowers the disposable income of the households.
B) Disposable income refers to the purchasing power of nominal income.
C) An increase in direct taxes will lower the disposable income of the households.
D) A decrease in government transfers will increase the disposable income of the households.
E) Disposable income refers to the net private transfers of the household sector.

Question

Quizplus · Accepted Answer

Direct taxes are taxes that are directly paid by individuals or households, such as income tax or property tax. An increase in direct taxes will reduce the amount of income available for households to spend, thus lowering their disposable income. Therefore, option C is correct, while options A, B, D, and E are incorrect.

Which of the Following Is True of the Disposable Income