What effect would taxation have on real consumption spending when government spending is autonomous?
A) Taxation reduces real consumption spending.
B) Taxation increases real consumption spending.
C) Taxation causes both real consumption spending and planned real saving to increase.
D) None of the above is correct.

Question

Quizplus · Accepted Answer

Taxation takes money away from individuals, reducing their disposable income and decreasing their ability to consume goods and services. Autonomous government spending is not directly related to taxation, so it does not have a significant impact on real consumption spending.

What Effect Would Taxation Have on Real Consumption Spending When