The Effect of a Change in Taxes Is Less Than

question 16

Multiple Choice

The effect of a change in taxes is less than the same sized change in government expenditure because

• A)some people do not pay their taxes.
• B)tax rates are the same regardless of income levels.
• C)the amount by which consumption initially changes is equal to MPS times the tax change.
• D)the amount by which consumption initially changes is equal to MPC times the tax change.
• E)changes in government expenditure do not directly affect consumption.

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Definitions:

Demographic Segmentation

The segmentation of a market into different groups according to factors like age, gender, income, occupation, and education levels.

Consumer Markets

Markets comprised of individuals and households that purchase goods and services for personal use.

Future Profit

The expected earnings or economic benefits that a company or investment will generate in future periods.

ROI

Return on Investment measures the gain or loss generated on an investment relative to the amount of money invested.