ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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increases, so aggregate demand shifts right
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increases, so aggregate supply shifts right
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decreases, so aggregate demand shifts left
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decreases, as aggregate supply shifts left
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Detailed explanation-1: -Expert Answer. When the taxes of any individual decrease, his consumption increases, and due to this the aggregate demand curve shifts right. But when the taxes of an individual increase, his consumption decrease as well as the aggregate demand curve shifts to left.
Detailed explanation-2: -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-3: -The aggregate demand curve, or AD curve, shifts to the right as the components of aggregate demand-consumption spending, investment spending, government spending, and spending on exports minus imports-rise. The AD curve will shift back to the left as these components fall.
Detailed explanation-4: -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-5: -ANS: The increase in expenditures means that government spending rises. The aggregate demand curve shifts to the right.