When the government imposes taxes, the disposable income of individuals decreases. This means that people have less money to spend after they have paid their taxes.

The Marginal Propensity to Consume (MPC) is the increase in consumer spending due to an increase in income. If income decreases because of taxation, the MPC also decreases. This is because people are less likely to spend money when they have less of it.

In other words, when taxes are high, people tend to save more and spend less, leading to a lower MPC. Conversely, when taxes are low, people have more disposable income and are likely to spend more, leading to a higher MPC.

So, in conclusion, taxation by the government generally leads to a decrease in the Marginal Propensity to Consume.

Question

When the government imposes taxes, the disposable income of individuals decreases. This means that people have less money to spend after they have paid their taxes.

The Marginal Propensity to Consume (MPC) is the increase in consumer spending due to an increase in income. If income decreases because of taxation, the MPC also decreases. This is because people are less likely to spend money when they have less of it.

In other words, when taxes are high, people tend to save more and spend less, leading to a lower MPC. Conversely, when taxes are low, people have more disposable income and are likely to spend more, leading to a higher MPC.

So, in conclusion, taxation by the government generally leads to a decrease in the Marginal Propensity to Consume.

Knowee AI · Accepted Answer

When the government imposes taxes, the disposable income of individuals decreases. This means that people have less money to spend after they have paid their taxes.

The Marginal Propensity to Consume (MPC) is the increase in consumer spending due to an increase in income. If income decreases because of taxation, the MPC also decreases. This is because people are less likely to spend money when they have less of it.

In other words, when taxes are high, people tend to save more and spend less, leading to a lower MPC. Conversely, when taxes are low, people have more disposable income and are likely to spend more, leading to a higher MPC.

So, in conclusion, taxation by the government generally leads to a decrease in the Marginal Propensity to Consume.

What happens to Marginal Propensity to Consume when there is taxation by government?

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What happens to Marginal Propensity to Consume when there is taxation by government?

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