A decrease in net taxes (select one):

a. raises aggregate expenditure by raising disposable income, thereby decreasing consumption.

b. raises aggregate expenditure by raising disposable income, thereby increasing consumption.

c. lowers aggregate expenditure by lowering disposable income, thereby decreasing consumption.

Question

Business

Leyla Nguyen

9 May, 23:19

A decrease in net taxes (select one):

a. raises aggregate expenditure by raising disposable income, thereby decreasing consumption.

b. raises aggregate expenditure by raising disposable income, thereby increasing consumption.

c. lowers aggregate expenditure by lowering disposable income, thereby decreasing consumption.

+2

Answers (1)

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Dallas Hurley · Answer 1

C, Raises aggregate expenditure by raising liable income, thereby increasing consumption.

Explanation:

Tax is a very important financial tool of any governmet to ensure its smooth running.

Tax can either be increased or decreased and each of these acts have their effects on the the counrty and on its people. For the purpose of this question, i will be sticking to tax decrease.

Tax decrease as the name implies is the reduction of taxes paid by individuals to the government from their taxable incomes.

When tax is reduced, there is a little more money for the people to spend and as such this affects the demand, consumption (of goods) as well as the gross domestic profit; GDP, of the country.

When the people have more money to spend, there is an increase in things they buy, wear, do, etc and so production in that country becomes high.

Tax decrease is most effective in a situations where there is high level of unemployment and slow paced economies.

cheers.