In which of the following ways does government affect the consumption component of planned aggregate expenditures?
A) through net taxes, which change disposable income
B) by purchasing goods and services, which increase consumption
C) by using subsidies to encourage firms to invest
D) by reducing the interest rate to encourage firms to invest
E) by producing public goods

Question

Quizplus · Accepted Answer

Government affects the consumption component of planned aggregate expenditures through net taxes, which change disposable income. Disposable income is the income that households have available after paying taxes, and a change in net taxes can affect consumers' ability and willingness to spend.

In Which of the Following Ways Does Government Affect the Consumption