Question

which of these would most likely occur if the government increased taxes to build up its supply of cash?
a unemployment would decrease.
b the public deficit would increase.
c the available yield would increase.
d consumption of goods would decrease.

Explanation:

To solve this, we analyze each option:

• Option A: Increasing taxes typically reduces disposable income, which can lead to less business activity and potentially higher unemployment, not lower. So A is incorrect.
• Option B: Increasing taxes increases government revenue, which would likely decrease the public deficit (since deficit is spending minus revenue), not increase it. So B is incorrect.
• Option C: "Available yield" is not directly related to a general tax increase. Tax increases don't inherently increase yields (e.g., on investments). So C is incorrect.
• Option D: When taxes increase, people have less disposable income. With less money to spend, the consumption of goods (both by individuals and businesses, as business income may also be taxed more) would decrease. This is consistent with the economic principle of disposable income affecting consumption.

Answer:

D. Consumption of goods would decrease.