ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The aggregate demand curve tends to shift to the left when total consumer spending declines. 2 Consumers might spend less because the cost of living is rising or because government taxes have increased. Consumers may decide to spend less and save more if they expect prices to rise in the future.

Detailed explanation-2: -In the model of aggregate demand and aggregate supply, a tax rate increase will shift the aggregate demand curve to the left by an amount equal to the initial change in aggregate expenditures induced by the tax rate boost times the new value of the multiplier.

Detailed explanation-3: -when the government raises taxes, the consumers spend less, so the aggregate demand is less. But the money that was given as taxes go to the government. That means that government spending should increase.

Detailed explanation-4: -Increases in taxes will decrease consumption (and shift the AD curve to the left) while decreases in taxes will increase consumption and shift the AD curve to the right.

Detailed explanation-5: -Decreasing any of the components shifts the AD curve to the left, leading to a lower real GDP and a lower price level.