According to the model developed in Chapter 3, when taxes are increased but government spending is unchanged, interest rates:
A) increase.
B) are unchanged.
C) decrease.
D) can vary wildly.

Question

Quizplus · Accepted Answer

When taxes are increased and government spending is unchanged, the disposable income of consumers decreases, leading to a decrease in consumption and aggregate demand. This can result in lower interest rates as the demand for borrowing decreases.

According to the Model Developed in Chapter 3, When Taxes