As a General Rule, When an Income Tax Is Added

question 95

Multiple Choice

As a general rule, when an income tax is added to the basic macroeconomic model, what happens to the consumption schedule?

• A)It will shift downward.
• B)It will shift upward.
• C)It will become flatter.
• D)It will become steeper.

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Definitions:

Great Depression

A severe worldwide economic downturn that lasted from 1929 until the late 1930s, characterized by massive unemployment and deflation.

Government Policy

The deliberate action or inaction by a government or public authority to address public issues and promote welfare.

Aggregate Demand

The aggregate need for products and services in an economy at a specific price level during a certain time frame.

Aggregate Demand

The total demand for all goods and services within an economy at various price levels, during a specific time period.