If a change in the tax laws leads to a $100 billion decrease in tax revenue,then aggregate demand
A)increases by $100 billion.
B)increases by less than $100 billion.
C)increases by more than $100 billion.
D)decreases by $100 billion.
E)decreases by more than $100 billion.

Question

Quizplus · Accepted Answer

A decrease in tax revenue increases disposable income, leading to higher consumer spending, which can have a multiplied effect on aggregate demand, increasing it by more than the initial $100 billion decrease in tax revenue.

If a Change in the Tax Laws Leads to a $100