Which of the following happens to aggregate demand if people want to save more for retirement and the government raises taxes?
A)Aggregate demand shifts right.
B)Aggregate demand shifts left.
C)If people save more, aggregate demand shifts right; f the government raises taxes, aggregate demand shifts left.
D)If people save more, aggregate demand shifts left; if the government raises taxes, aggregate demand shifts right.

Question

Quizplus · Accepted Answer

When people save more for retirement, they decrease their consumption spending, which is a component of aggregate demand. Similarly, when the government raises taxes, it decreases disposable income and consumption spending, which also reduces aggregate demand. Therefore, both actions would shift aggregate demand to the left.

Which of the Following Happens to Aggregate Demand If People