Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It increases disposable income.
B
It decreases disposable income.
C
It has no effect on disposable income.
D
It increases government revenue without affecting consumers.
Understanding the Answer
Let's break down why this is correct
Answer
When taxes increase, people generally have less money to spend. This is because a larger portion of their income goes to the government instead of being available for buying goods and services. For example, if a person earns $1,000 a month and their taxes increase by $100, they now only have $900 to spend on things like food, clothes, or entertainment. As a result, many consumers might choose to buy less or save more, which can slow down the economy since businesses may earn less revenue. Overall, higher taxes can lead to reduced consumer spending, affecting both individuals and the economy as a whole.
Detailed Explanation
When taxes go up, people have less money left after paying taxes. Other options are incorrect because Some might think higher taxes give people more money to spend; It's a common belief that taxes don't change how much money people have.
Key Concepts
Taxes
Topic
Effects of Taxes and Subsidies
Difficulty
easy level question
Cognitive Level
understand
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