Which component of aggregate expenditure is affected when net taxes are cut?
A)net exports; they increase
B)government purchases; they fall
C)government purchases; they rise
D)consumption; it falls
E)consumption; it rises

Question

Quizplus · Accepted Answer

Net taxes are a component of disposable income, which affects consumption. When net taxes are cut, disposable income increases, which leads to an increase in consumption. Therefore, the correct answer is E, consumption rises.

Which Component of Aggregate Expenditure Is Affected When Net Taxes