Answer to Question #73760 in Macroeconomics for hazz
Which of the following would not be expected to lead to an increase in consumption and why?
A. A fall in the cost of servicing debt B. An increase in disposable income C. An increase in income tax that affects disposable income D. A rise in expectations of future income E. A loosening of credit restrictions that allows consumption smoothing
I think, it is C (because increasing in income tax deal causes reduction of net income that`s why people who is engaged in business have less money which they can spent to consume ) and D (increasing expectations of future revenues will lead to higher inflation, so if the real income is unaltered, consumption will decrease at the moment)