A change in taxes shifts the aggregate _____ curve by _____ than a change in government purchases of goods and services and has a smaller effect on real GDP.

Question

Quizplus · Accepted Answer

A change in taxes affects disposable income and consumption, which is a component of aggregate demand. However, it has a smaller impact on real GDP compared to a change in government purchases of goods and services because consumption is only one component of aggregate demand. A change in government purchases affects both consumption and investment, which have larger effects on real GDP.

A Change in Taxes Shifts the Aggregate _____ Curve by _____

A Change in Taxes Shifts the Aggregate _ Curve by _