If the multiplier for taxes taxes is negative 1.30 - 1.30 and taxes are taxes are increased by $ 150 150 billion, calculate the amount by which the demand curve will ultimately shift. Shift of the demand curve = $ nothing billion. (Enter your response as an integer and include a minus sign if necessary.) Enter your answer in the answer box. Save for Later

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Business

Dania Fox

9 February, 04:24

If the multiplier for taxes taxes is negative 1.30 - 1.30 and taxes are taxes are increased by $ 150 150 billion, calculate the amount by which the demand curve will ultimately shift. Shift of the demand curve = $ nothing billion. (Enter your response as an integer and include a minus sign if necessary.) Enter your answer in the answer box. Save for Later

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Zaiden Dougherty · Answer 1

The demand curve will shift to the left thus, decreasing the both, the level of price and the output of the economy.

Explanation:

increase in taxes x tax multiplier = effect of taxes

150 billons x - 1.3 = - 195 billions

This will make the aggregate demand decrease.

However, if this increase in taxes is backed up with government spending will end up with a positive effect as the governement spending also has a multiplier effect which is greater than tax multiplier by one unit.