How do changes in income tax policies affect aggregate demand?
A) Higher taxes increase disposable income, consumption, and aggregate demand.
B) Higher taxes reduce disposable income, consumption, and aggregate demand.
C) Higher taxes increase corporate investment and aggregate demand.
D) Higher taxes increase aggregate supply and thus increase aggregate demand as well.
Answer: B
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The circular flow diagram shows
A) how nominal GDP is distinct from real GDP. B) how the prices of factors are determined. C) the effects of inflation in a simple economy. D) the flows between different sectors of the economy.
If there is a fall in the interest rate, _____.
(A) Businesses will be more likely to expand their facilities. (B) The unemployment rate will most likely rise. (C) Consumers will be less likely to buy more expensive items. (D) There will be a downturn in the economy.