Assertion (A): A rise in income tax helps to reduce deficient demand.
Reason (R): Higher taxes leave households with less disposable income to spend.

Both A and R are true, and R is the correct explanation of A.Correct answerYour answerBoth A and R are true, but R is not the correct explanation of A.Correct answerYour answerA is true, but R is false.Correct answerYour answerA is false, but R is true.Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer D

Correct answer: D

R is true: taxes reduce disposable income and consumption.
So a tax rise makes deficient demand worse, not better. A is false.

Concept: Taxes and excess demand
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsFiscal measures

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Ten questions from Excess & Deficient Demand, at your own pace.

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Ten questions from Excess & Deficient Demand, at your own pace.

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Assertion (A): A rise in income tax helps to reduce deficient demand.Reason (R): Higher taxes leave households with less disposable income to spend.

Explanation

Assertion (A): A rise in income tax helps to reduce deficient demand.
Reason (R): Higher taxes leave households with less disposable income to spend.