If taxes rise, then aggregate demand shifts
A)right, making unemployment higher than otherwise.
B)right, making unemployment lower than otherwise.
C)left, making unemployment higher than otherwise.
D)left, making unemployment lower than otherwise.

Question

Quizplus · Accepted Answer

When taxes rise, consumers have less disposable income to spend, which reduces consumption. This decrease in consumption leads to a leftward shift in the aggregate demand curve, potentially increasing unemployment as businesses respond to decreased demand for their products by reducing their workforce.

If Taxes Rise, Then Aggregate Demand Shifts