Answer the question on the basis of the following data: $\begin{array}{cc}
\underline{\text { After-Tax Income} } &\underline{ \text { Consumption }} \
\$ 1,000 & \$ 900 \
2,000 & 1,800 \
3,000 & 2,700 \
4,000 & 3,600 \
5,000 & 4,500
\end{array}$ The data suggest that:
A) a policy of tax reduction will increase consumption.
B) a policy of tax increases will increase consumption.
C) tax changes will have no impact on consumption.
D) after-tax income should be lowered to increase consumption.

Question

Answer the question on the basis of the following data: $\begin{array}{cc}
\underline{\text { After-Tax Income} } &\underline{ \text { Consumption }} \
\$ 1,000 & \$ 900 \
2,000 & 1,800 \
3,000 & 2,700 \
4,000 & 3,600 \
5,000 & 4,500
\end{array}$  The data suggest that:
A) a policy of tax reduction will increase consumption.
B) a policy of tax increases will increase consumption.
C) tax changes will have no impact on consumption.
D) after-tax income should be lowered to increase consumption.

Quizplus · Accepted Answer

The data shows a direct relationship between after-tax income and consumption; as after-tax income increases, consumption also increases. Therefore, a policy of tax reduction, which increases after-tax income, would likely increase consumption.

Answer the Question on the Basis of the Following Data