Which of the following is likely to happen if the government lowers tax rates?
A) Unemployment will increase.
B) Consumption will increase.
C) Investment will decrease.
D) Price level will fall.

Question

Quizplus · Accepted Answer

Lowering tax rates usually leaves more disposable income with consumers, leading to an increase in spending, which in turn leads to an increase in consumption. Lower tax rates can also incentivize people to work harder, take on more risk, and invest more. Therefore, lowering taxes typically results in higher economic growth and lower unemployment. Investment is less likely to decrease as people have more disposable income to invest. The price level might increase instead of falling as demand for goods and services increases. However, this is not a guaranteed outcome.

Which of the Following Is Likely to Happen If the Government