If Consumers Save the Entire Amount of the Increase in Their

question 143

Multiple Choice

If consumers save the entire amount of the increase in their disposable income due to a tax cut,the tax cut will ________.

• A) have no effect on GDP
• B) lead to an increase in GDP
• C) lead to a decrease in GDP
• D) lead to an increase in the current account deficit

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Definitions:

Private Consumption

The total spending by households and individuals on goods and services for personal use, excluding government spending.

Pareto Optimal

A circumstance in resource distribution where an improvement for one individual correlates with a setback for another.

Public Goods

Goods that are non-excludable and non-rivalrous, meaning their consumption by one individual does not reduce availability to others.

Private Consumption

The total value of all goods and services consumed by individuals and households for personal use.