if-a-government-increases-taxes-what-is-the-expected-impact-on-disposable-income

Question

If a government increases taxes, what is the expected impact on disposable income and consumption?

Accepted Answer

Disposable income decreases, leading to lower consumption.

Answer

Disposable income remains unchanged, having no effect on consumption.

Answer

Disposable income decreases, but consumption remains unchanged.

Answer

Disposable income increases, leading to higher consumption.