Use the line drawing tool to show the effect on demand Label the new curve ZZ_2.

Question

Use the line drawing tool to show the effect on demand Label the new curve ZZ_2. 2.) Use the point drawing tool to indicate the new equilibrium point. Label the point E_2. Carefully follow the instructions above, and only draw the required objects. From the graph, this policy shows that demand will People with high income would be expected to have a lower propensity I to consume than people with low incomes. Given this, do you think tax 1 cuts will be more effective at stimulating demand when they arc directed toward high-income or toward low-income taxpayers? Demand would be less stimulated with tax cuts targeted at high-income individuals because they save a larger portion of income. If other variables, such as how much is paid in taxes, arc considered, the effect on demand becomes uncertain. Demand would be more stimulated with tax cuts targeted at low-income individuals because they will spend a larger portion of income changes. All of the above.

Explanation / Answer

The correect option is C

Explanation : People with lower incomes have a greater propensity to spend than with people with higher incomes . Tax cuts will stimulate demand in lower income individuals because they now have more money to spend and their consumption increases .

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