Which of the following events will cause a reduction in equilibrium output?

Question

Quizplus · Accepted Answer

All of the choices listed will cause a reduction in equilibrium output. An increase in the marginal propensity to save (A) or a reduction in the marginal propensity to consume (C) both lead to a decrease in consumer spending, which reduces aggregate demand and thus equilibrium output. An increase in taxes (B) reduces disposable income, leading to a decrease in consumer spending and investment by businesses, which also reduces equilibrium output.

Which of the Following Events Will Cause a Reduction in Equilibrium