Answer the question on the basis of the following data. The data suggest that
A) a policy of tax reduction will increase consumption.
B) a policy of tax increases will increase consumption.
C) tax changes will have no impact on consumption.
D) after-tax income should be lowered to increase consumption.

Question

Answer the question on the basis of the following data.  The data suggest that
A) a policy of tax reduction will increase consumption. 
B) a policy of tax increases will increase consumption. 
C) tax changes will have no impact on consumption. 
D) after-tax income should be lowered to increase consumption.

Quizplus · Accepted Answer

The data suggests that there is a positive correlation between disposable income and consumption, as seen in the graph. This means that if taxes are reduced, disposable income will increase, leading to an increase in consumption. Therefore, the best choice is A, which states that a policy of tax reduction will increase consumption.

Answer the Question on the Basis of the Following Data