An Increase in Taxes Lowers Income

question 64

Multiple Choice

An increase in taxes lowers income:

• A) and the interest rate in the short run, but leaves both unchanged in the long run.
• B) in the short run, but leaves it unchanged in the long run, while increasing consumption and lowering investment.
• C) in the short run, but leaves it unchanged in the long run, while lowering consumption and increasing investment.
• D) and the interest rate in both the short and long runs.

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