Question

An increase in tax rates affects equilibrium real GDP through two channels: ________ disposable income and consumer spending, and ________ the size of the multiplier effect. Group of answer A. choices increasing; B. decreasing decreasing; C. decreasing increasing; D. increasing decreasing; E. increasing

Answer 1

Answer:B decreasing increasing

Explanation:

The increase in tax rate will affect disposable income available for spending after tax deduction this will have an increasing multiplier effect as it reduces consumption which leads to a fall in companies turnover, lower profit , lower companies tax, staff layoff, increase crime rate, increase security spending and the list continues.