Which of the following will cause a negative aggregate demand shock?
A)an increase in the price of raw materials
B)a decrease in the domestic price level
C)an increase in the domestic price level
D)an increase in government expenditures
E)an increase in tax rates

Question

Quizplus · Accepted Answer

An increase in tax rates will reduce disposable income and decrease consumer spending, causing a negative aggregate demand shock. The other choices could potentially lead to inflation (C) or reduce supply (A) but would not directly cause a negative aggregate demand shock.

Which of the Following Will Cause a Negative Aggregate Demand