If Consumption Were a Direct Function of Disposable Income, How

question 4

Essay

If consumption were a direct function of disposable income, how would a decrease in personal taxes or an increase in transfer payments affect consumption?
​

---

Definitions:

Cash Flows

The total amounts of money being transferred into and out of a business, particularly in terms of operational, investing, and financing activities.

Financial Statement

Consolidated documents that present the financial activities and condition of a business, including the balance sheet, income statement, and cash flow statement.

Balance Sheet

A financial statement that provides a snapshot of a company’s financial position at a specific point in time, listing assets, liabilities, and shareholders' equity.

Income Statement

A document detailing a firm's income and outgoings during a certain time, ending in either a profit or a deficit.