Other things equal, a reduction in personal income taxes will decrease consumption and will have an expansionary effect on real GDP.

Name: Other things equal, a reduction in personal income taxes will decrease consumption and will have an expansionary effect on real GDP.
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Question

Quizplus · Accepted Answer

This statement is false. A reduction in personal income taxes is likely to increase consumption, as individuals have more disposable income. This increase in consumption can lead to an expansionary effect on real GDP.

Other Things Equal, a Reduction in Personal Income Taxes Will