In a binding situation, a decrease in net taxes
A) shifts the AD curve to the right.
B) shifts the AD curve to the left.
C) does not shift the AD curve.
D) causes the AD curve to become horizontal.

Question

Quizplus · Accepted Answer

In a binding situation, a decrease in net taxes would lead to an increase in disposable income for consumers, resulting in higher consumer spending. This increase in consumer spending would shift the AD curve to the right, as the overall demand for goods and services in the economy would increase.

In a Binding Situation, a Decrease in Net Taxes