Which of the following correctly describes the effects of a decrease in net taxes?
A) Disposable income increases, consumption decreases, and saving decreases.
B) Disposable income increases, consumption increases, and saving increases.
C) Disposable income decreases, consumption increases, and saving increases.
D) Disposable income decreases, consumption decreases, and saving decreases.
E) There is no effect on disposable income, consumption, or saving.

Question

Quizplus · Accepted Answer

A decrease in net taxes will increase disposable income, which will result in an increase in consumption and also an increase in saving. This is because individuals will have more money to spend or save. Therefore, choice B is the correct answer.

Which of the Following Correctly Describes the Effects of a Decrease