Aggregate demand shifts to the right when
A) government spending is reduced.
B) tax rates are reduced.
C) equilibrium GDP is reduced.
D) total intended spending is reduced.
E) the inflationary gap is reduced.

Question

Quizplus · Accepted Answer

When tax rates are reduced, consumers have more disposable income, which leads to an increase in consumption spending. This, in turn, increases aggregate demand, shifting the AD curve to the right.

Aggregate Demand Shifts to the Right When