When net taxes increase and government purchases decrease,
A)the price level will rise
B)the money supply must rise
C)the aggregate demand curve shifts leftward
D)output and employment both rise
E)the aggregate supply curve shifts leftward

Question

Quizplus · Accepted Answer

When net taxes increase and government purchases decrease, it results in a decrease in the economy's aggregate demand. Therefore, the aggregate demand curve shifts leftward. A leftward shift in the aggregate demand curve leads to a decrease in both output and employment levels.

When Net Taxes Increase and Government Purchases Decrease