Question

How will a decrease in personal income taxes and an increase in government spending affect consumer spending and employment

Answer 1

• Consumer spending increases

• Employment increases

Step-by-step explanation:

If there is a decrease in personal income taxes, this will mean that consumers have more disposable income. This coupled with an increase in government spending will lead to more money being available for spending in an economy.

Consumer spending will therefore increase and in response, companies will have to produce more goods and services. They will need more labor to do so which will lead to a rise in employment rates.