If tax rates were raised substantially,we would expect which of the following scenarios to result?
A)Measured GDP would fall relative to the actual amount of true economic activity.
B)Measured GDP would come closer to reflecting the actual amount of true economic activity.
C)GDP would increase by the amount of the new tax revenue because of the higher level of government spending it allows.
D)Personal consumption expenditures would rise,while government spending would fall.

Question

Quizplus · Accepted Answer

When tax rates are raised, individuals and businesses have less disposable income to spend and invest, which can reduce economic activity. As a result, measured GDP would fall relative to the actual amount of true economic activity.

If Tax Rates Were Raised Substantially,we Would Expect Which of the Following