The introduction of an autonomous net tax will
A)have no effect on real GDP,since real GDP = C + I + G,which does not include taxes
B)affect consumption through a change in disposable income
C)affect consumption through its effect on investment
D)affect government spending,since the government levies the tax
E)increase real GDP,since it enables government to increase spending

Question

Quizplus · Accepted Answer

The introduction of an autonomous net tax will affect consumption through a change in disposable income. Autonomous net tax refers to a tax that is not dependent on the level of income or economic activity. In this case, if the government introduces such a tax, it will reduce disposable income, and thus decrease consumption, which is a component of GDP. Therefore, the correct answer is B.

The Introduction of an Autonomous Net Tax Will