When the Federal government increases the level of taxes in the economy,this has the effect of
A)increasing AD.
B)decreasing AD.
C)increasing AS in the long run.
D)decreasing AS in the long run.

Question

Quizplus · Accepted Answer

Increasing taxes reduces the disposable income available to individuals and firms, decreasing their spending and investment, which decreases aggregate demand (AD) in the economy.

When the Federal Government Increases the Level of Taxes in the Economy,this