What Effect Would Taxation Have on Real Consumption Spending When

question 157

Multiple Choice

What effect would taxation have on real consumption spending when government spending is autonomous?

• A) Taxation reduces real consumption spending.
• B) Taxation increases real consumption spending.
• C) Taxation causes both real consumption spending and planned real saving to increase.
• D) None of the above is correct.

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Definitions:

Per Unit Tax

A tax levied on goods that is fixed in amount for each unit produced or sold.

Consumer Surplus

The gap in the total funds consumers are willing and financially prepared to allocate for a good or service, versus the funds actually allocated.

Producer Surplus

The difference between the amount producers are willing to supply a good for and the actual amount they receive when the good is sold.

Producer Surplus

The gap highlighting the difference between the initial asking price by sellers for goods or services and the ultimately received price.