An decrease in taxes shifts aggregate demand Select one: a. to the left. The larger the multiplier is, the less it shifts. b. to the right. The larger the multiplier is, the less it shifts. c. to the right. The larger the multiplier is, the farther it shifts. d. to the left. The larger the multiplier is, the farther it shifts.

Question

Social Studies

Hugh Mcdaniel

12 February, 07:54

An decrease in taxes shifts aggregate demand Select one: a. to the left. The larger the multiplier is, the less it shifts. b. to the right. The larger the multiplier is, the less it shifts. c. to the right. The larger the multiplier is, the farther it shifts. d. to the left. The larger the multiplier is, the farther it shifts.

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Shelly · Answer 1

A. to the left. The larger the multiplier is, the less it shifts.

Explanation:

Aggregate Demand may be seen as a total amount of products and services consumers are willing to buy in a given economy and at a particular period of time. Sometimes aggregate demand (AD) changes in a way that alters its relationship with aggregate supply (AS) and this is called a "shift."

In macroeconomic models, right shifts in aggregate demand are usually expressed as a good sign for the economy. While a shifts to the left are usually expressed negatively.

So if there is a decrease in taxes, the aggregate demand shifts to the left. A reduction in the investment tax credit, or if corporate income tax rates is increased, this will reduce investment and shift the aggregate demand curve to the left. Real GDP and the price level will fall.