If taxes are cut,there is
A)an increase in aggregate demand and the AD curve shifts rightward.
B)a decrease in aggregate demand and the AD curve shifts leftward.
C)an increase in the quantity of real GDP demanded and a movement up along the AD curve.
D)a decrease in the quantity of real GDP demanded and a movement down along the AD curve.
E)no change in aggregate demand,only a change in potential GDP.

Question

Quizplus · Accepted Answer

When taxes are cut, people have more disposable income and therefore increase their consumption spending. This increase in consumption spending leads to an increase in aggregate demand causing the AD curve to shift rightward.

If Taxes Are Cut,there Is