Raising taxes will: a. raise disposable income and raise spending. b. lower disposable income and raise spending. c. lower disposable income and lower spending. d. raise disposable income and lower spending.
Question
Raising taxes will:
a. raise disposable income and raise spending.
b. lower disposable income and raise spending.
c. lower disposable income and lower spending.
d. raise disposable income and lower spending.
Solution
c. lower disposable income and lower spending.
Explanation: Step 1: Understand the concept of taxes. Taxes are mandatory financial charges imposed by the government on individuals or entities.
Step 2: Understand the concept of disposable income. Disposable income is the amount of money that households have available for spending and saving after income taxes have been accounted for.
Step 3: Understand the relationship between taxes and disposable income. When taxes increase, the amount of money that individuals or entities have after paying taxes (disposable income) decreases.
Step 4: Understand the relationship between disposable income and spending. When individuals have less disposable income, they generally spend less because they have less money available.
Therefore, raising taxes will lower disposable income and lower spending.
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