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Last year a ₤400 million tax increase was accompanied by a ₤600 million decrease in consumer spending. One reason why spending decreased by more than taxes were increased is that:
a) the tax increase raised interest rates which in turn depressed consumer borrowing. c) reduced spending by those with lower take-home pay led to decreased income and spending by others. b) the tax increase induced fewer transfer payments which in turn deterred consumer spending. d) higher taxes required higher government spending which in turn discouraged private spending.
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