Which decreases aggregate demand?
A) lower interest rates.
B) lower value of Canadian dollar.
C) higher income taxes.
D) rising price level.
E) rising input prices.

Question

Quizplus · Accepted Answer

Higher income taxes reduce disposable income, which reduces consumption spending and therefore decreases aggregate demand. A lower interest rate would increase spending and aggregate demand, a lower value of the Canadian dollar would increase exports and therefore increase aggregate demand, a rising price level would lead to inflation and increase aggregate demand as people spend more before prices rise further, and rising input prices would likely decrease supply and potentially increase prices, but the effect on aggregate demand is unclear.

Which Decreases Aggregate Demand