The Figure Given Below Shows the Consumption Functions of an Economy.?Figure

question 64

Multiple Choice

The figure given below shows the consumption functions of an economy.?Figure 9.4

-Refer to the Figure 9.4. If the economy is in equilibrium at A, which of the following is most likely to occur if consumers expect a period of rapid economic expansion?

• A) The equilibrium will move from point A to point F.
• B) The equilibrium will move from point A to point C.
• C) There will be a new equilibrium disposable income at point G.
• D) The equilibrium will remain at point A.
• E) There will be a new equilibrium disposable income at point E.

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Definitions:

Progressive Tax

A tax system in which the tax rate increases as the taxable amount increases, thereby imposing a higher percentage rate on higher-income earners.

High-Income

Earning a substantial amount of money, typically above the median income level in a given region or country.

Low-Income

Referring to individuals or families whose earnings are significantly lower than the average, often quantified by government standards.

Regressive Tax

A tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases.