A decrease in net taxes at a given price level leads to
A) no change in aggregate demand.
B) an increase in aggregate demand.
C) a decrease in aggregate demand.
D) a decrease in aggregate supply.

Question

Quizplus · Accepted Answer

A decrease in net taxes means that households have more disposable income, leading to an increase in consumption spending. This increase in spending leads to an increase in aggregate demand.

A Decrease in Net Taxes at a Given Price Level