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.

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Definitions:

Consistency

The quality of achieving a level of performance or behavior that does not vary greatly in quality over time.

Organization Design

The planning and structuring of an organization's framework and systems to align with its goals and strategy, optimizing its operational efficiency.

Internal Factors

Influences originating within a person or organization that affect behaviors, decisions, or operations.

External Factors

Elements outside an individual or organization that can impact its performance or decision-making process.