When taxes decrease, consumption
A) increases, so aggregate demand shifts right.
B) increases, so aggregate supply shifts right.
C) decreases, so aggregate demand shifts left.
D) decreases, so aggregate supply shifts left.

Question

Quizplus · Accepted Answer

When taxes decrease, disposable income increases, making consumers have more money to spend. This leads to an increase in consumption, which in turn shifts aggregate demand to the right.

When Taxes Decrease, Consumption