In a binding situation,an increase in net taxes
A) shifts the AD curve to the right.
B) shifts the AD curve to the left.
C) does not shift the AD curve.
D) causes the AD curve to become horizontal.

Question

Quizplus · Accepted Answer

In a binding situation, an increase in net taxes reduces disposable income which lowers consumption spending. This decrease in consumption shifts the aggregate demand (AD) curve to the left.

In a Binding Situation,an Increase in Net Taxes