How does the aggregate demand and supply model reflect a decrease in taxes?
A) Consumption increases,so aggregate demand shifts right.
B) Consumption increases,so aggregate supply shifts right.
C) Consumption decreases,so aggregate demand shifts left.
D) Consumption decreases,so aggregate supply shifts left.

Question

Quizplus · Accepted Answer

When taxes decrease, disposable income increases, leading to an increase in consumption spending. This increase in consumption spending leads to an increase in aggregate demand, shifting the AD curve to the right.

How Does the Aggregate Demand and Supply Model Reflect a Decrease