The higher the tax rate government spending unchanged the a

The higher the tax rate, government spending unchanged, the...

a) higher the level of intended spending.

b) lower the equilibrium level of GDP.

c) higher the amount of consumption.

d) lower the 45-degree line.

e) higher the amount of disposable income.

Solution

Option d is the right answer

If tax will increase and there will be no goverment expenditure then overall disposable income has been decreased and people will not have money to spend . So the expenditure line will fall.