An increase in taxes

Question

Quizplus · Accepted Answer

When taxes increase, people and businesses have less money to spend, which means less money going into the economy's spending stream. This can lead to decreased aggregate demand and potentially slow down economic growth. Therefore, choice A is correct. Choices B and C are incorrect as they suggest the opposite effect of what happens when taxes increase. Choice D is also incorrect as increasing taxes does not necessarily lead to a balanced budget; it depends on other factors such as government spending.

An Increase in Taxes