In a simple macro model with a constant price level,an increase in the net tax rate causes the AE curve to
A)shift parallel downward.
B)shift parallel upward.
C)rotate downward.
D)rotate upward.
E)remain stationary.

Question

Quizplus · Accepted Answer

An increase in the net tax rate reduces disposable income, leading to a decrease in consumption. This causes the AE curve to rotate downward as the slope of the curve becomes flatter.

In a Simple Macro Model with a Constant Price Level,an