When the government reduces taxes, all other things being equal, what will decrease?
A) consumption
B) take-home pay
C) household saving
D) government surplus

Question

Quizplus · Accepted Answer

When the government reduces taxes, it leads to a decrease in government surplus as the government revenue decreases due to lower tax rates. Option A (consumption), Option B (take-home pay), and Option C (household saving) are unlikely to decrease when taxes are reduced as people have more income to spend or save.

When the Government Reduces Taxes, All Other Things Being Equal