Which of the following statements about taxes is true?

Which of the following statements about taxes is true?

a. Taxes are the difference between disposable income and household savings,

b. Taxes are the difference between exports and imports,

c. Taxes are the difference between GDP and disposable income,

d. Taxes are the difference between consumption expenditure and savings.

Answer: c. Taxes are the difference between GDP and disposable income,

Regarding the role of taxes in macroeconomics, it is necessary to state that taxes can be considered as one of the factors included in the calculation of several crucial values. Hypothesis suggesting that the statement ‘’Taxes are the difference between Gross Domestic Product and Per Disposable income’’ is not untrue is valid. The Gross Domestic Product which is often abbreviated as GDP is a measure of the total value of all finished and intermediate goods and services taken in a country within a specific period of time. But disposable income represents the quantity of income households have at their disposal once they have paid taxes on the total income. Therefore, the difference between GDP and disposable income reveals the amount of money people and businesses parted with in taxes. This difference explains all sort of tax that the government impose such as the Personal income tax, the corporate tax as well as the other form of indirect tax. Therefore, it is possible for the economists to calculate out of the total money available in the economy how much of it can be spent out and save in the economy by subtracting the taxes from the GDP.