explanation needed!! 8) If net taxes fall by $80 billion, we would expect A) household saving to rise by $80 billion...

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explanation needed!!
8) If net taxes fall by $80 billion, we would expect A) household saving to rise by $80 billion. B) household saving to fall

business economics

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Answer 1

Answer #1

Answer

Option D

Consumption =a+MPC*YD

YD=Y-T

the cut in taxes increases YD (disposable income)

It increases consumption by the faction of MPC (marginal propensity to consume) and increases saving by 1-MPC so the increase in the saving is less than the cut in the taxes.

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Answer 2

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Add Answer to: explanation needed!! 8) If net taxes fall by $80 billion, we would expect A) household saving to rise by $80 billion...

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explanation needed!! 8) If net taxes fall by $80 billion, we would expect A) household saving to rise by $80 billion...