Which of the following statements about taxation is incorrect?
A)A tax cut affects aggregate demand indirectly.
B)A tax cut raises income and expenditures.
C)Cutting taxes by $20 is not the same as increasing government spending by $20.
D)A change in taxes does not affect consumption.
E)An increase in taxes decreases income and expenditures.

Question

Quizplus · Accepted Answer

A change in taxes can affect consumption, as it can affect disposable income and therefore the ability of individuals to spend.

Which of the Following Statements About Taxation Is Incorrect