In the Traditional Keynesian Model, an Increase in Current Taxes

question 249

Multiple Choice

In the traditional Keynesian model, an increase in current taxes

• A)increases disposable income but does not affect consumption.
• B)decreases both disposable income and consumption.
• C)decreases disposable income but increases consumption.
• D)has no effect on either disposable income or consumption.

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Definitions:

Effective Interest Method

A method of calculating the amortized cost of a bond and the amount of interest expense over the life of the bond by applying the effective interest rate to the carrying amount of the bond.

Accrued Interest

Interest that has been earned but not yet received or recorded as payment, often associated with loans or bonds.

Bond Sinking Fund

A fund set up by an issuer of a bond in which money is saved over time for the sole purpose of redeeming or buying back some or all of the bonds prior to their maturity.

Bond Sinking Fund

A method employed by issuers of bonds to set aside money over time to retire their debt at maturity.