An increase in aggregate demand is most likely to be caused by:
A) An increase in real interest rates
B) A decrease in government spending
C) A decrease in expected returns on investment
D) A decrease in the tax rates on household income

Question

Quizplus · Accepted Answer

An increase in aggregate demand means that there is an increase in spending within the economy. If taxes on household income decrease, households have more disposable income, which leads to higher consumer spending. This increase in consumer spending leads to an increase in aggregate demand.

An Increase in Aggregate Demand Is Most Likely to Be