Compulsory Savings Reduce Disposable Income

Steps:

• Identify consumer expenditure as spending on goods and services from disposable income.
• Evaluate each policy's impact on disposable income or incentives to spend.
• Compulsory saving forces money aside, lowering funds available for consumption.
• Compare with other options that either increase spending power or economic activity.

Why A is correct:

• Compulsory saving mandates a portion of income be saved, directly reducing disposable income available for consumer expenditure, per the consumption function C = C0 + c(Y - T - S), where S increases and lowers spending.

Why the others are wrong:

• B: Infrastructure investment boosts economic growth and jobs, increasing income and consumer spending.
• C: Issuing more currency raises money supply, potentially causing inflation that erodes purchasing power but initially encourages more spending.
• D: Reducing indirect taxes lowers prices of goods, making consumption cheaper and increasing expenditure.

Final answer: A