How 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 using net taxes to encourage firms to invest

Question

How 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 using net taxes to encourage firms to invest

Quizplus · Accepted Answer

Government affects the consumption component of planned aggregate expenditures through net taxes, which change disposable income. If net taxes increase, disposable income decreases, which causes a decrease in consumption. Conversely, if net taxes decrease, disposable income increases, and consumption increases as a result.

How Does Government Affect the Consumption Component of Planned Aggregate