Which of the following changes in taxes would lead to the smallest increase in consumption?
A)a $20,000 decrease in taxes, if MPC equals 0.5
B)a $12,000 decrease in taxes, if MPC equals 0.75
C)a $15,000 decrease in taxes, if MPC equals 0.6
D)a $30,000 decrease in taxes, if MPC equals 0.25

Question

Which of the following changes in taxes would lead to the smallest increase in consumption?
A)​a $20,000 decrease in taxes, if MPC equals 0.5
B)​a $12,000 decrease in taxes, if MPC equals 0.75
C)​a $15,000 decrease in taxes, if MPC equals 0.6
D)​a $30,000 decrease in taxes, if MPC equals 0.25

Quizplus · Accepted Answer

The increase in consumption due to a tax decrease can be calculated using the formula: change in consumption = MPC * change in taxes. For each option: A) $20,000 * 0.5 = $10,000, B) $12,000 * 0.75 = $9,000, C) $15,000 * 0.6 = $9,000, D) $30,000 * 0.25 = $7,500. Option D leads to the smallest increase in consumption.

Which of the Following Changes in Taxes Would Lead to the Smallest