In the traditional Keynesian model, an increase in current taxes decreases both disposable income and consumption....
In the traditional Keynesian model, an increase in current taxes
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decreases both disposable income and consumption. |
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decreases disposable income but increases consumption. |
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increases disposable income but does not affect consumption. |
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has no effect on either disposable income or consumption. |
Homework Answers
ANswer
Option 1
decreases both disposable income and consumption
Disposable income =Y-T
the disposable income decreases
C=A+B*DI
where
0<B<1
the decrease in DI decreases C means the consumption decreases
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