An increase in personal income taxes would shift AD to the
A) right because C will increase.
B) left because C will decrease.
C) right because G will increase.
D) left because G will decrease.

Question

Quizplus · Accepted Answer

An increase in personal income taxes would decrease disposable income and therefore decrease consumption (C). As consumption is a component of aggregate demand (AD), this would cause AD to shift left.

An Increase in Personal Income Taxes Would Shift AD to the