A decrease in net taxes (taxes minus transfer payments) would do which of the following in the short run?

Question

Quizplus · Accepted Answer

A decrease in net taxes would increase disposable income and therefore increase consumption spending, eventually resulting in an increase in real GDP and possibly inflation. In the short run, however, the increase in consumption spending would lead to an increase in demand for goods and services, which would lead to firms hiring more workers to meet that demand, and therefore reducing unemployment. None of the other choices are necessarily true in the short run.

A Decrease in Net Taxes (Taxes Minus Transfer Payments) Would