Suppose That the Government Increases Taxes

question 141

Multiple Choice

Suppose that the government increases taxes. One effect of this change is that it decreases

• A) disposable income, which decreases consumption expenditure and aggregate demand.
• B) government expenditure, which decreases aggregate demand.
• C) the size of the government expenditure multiplier.
• D) disposable income which then decreases aggregate supply.

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Definitions:

Spiritual Self

A person’s moral center.

Self-Concept

A person’s image of him- or herself.

Individualistic Culture

A culture that emphasizes the rights and freedoms of the individual over the needs and demands of the group.

Cooperative

Pertaining to a willingness or tendency to work together towards a common goal or benefit.