Identify the assumption: "The government increased taxes to reduce spending."
Show answer & explanation
Correct answer: B
Explanation
The correct answer to this question is Higher taxes mean less purchasing.
The statement states that the government has increased taxes "to reduce spending." The point to note here is that the government is not talking about reducing its own spending, but rather wants to reduce consumer spending by the market/citizens (this is often done to control inflation).
Implicit Assumption: The government is assuming that when taxes are increased, people will have less money to spend or things will become more expensive, which will lead to fewer purchases and lower market spending.