The Demand-Side Effect of a Change in Taxes Is Less

question 235

Multiple Choice

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

• A) only part of the increase in disposable income from the tax cut is spent.
• B) the amount by which taxes change is affected by the MPC.
• C) changes in government expenditure do not directly affect consumption.
• D) tax rates are the same regardless of income levels.

---

Definitions:

Segmented Income Statement

An income statement broken down into segments or divisions of a company, showing financial performance for each separately.

Electronic Calculators

Electronic devices used for performing mathematical operations, ranging from basic to complex calculations.

Product Line

A group of related products produced by a company, often catering to a specific market or segment.

Unit Product Cost

The total expense involved in manufacturing a single product unit, encompassing direct materials, direct labor, and apportioned overhead costs.