ECONOMICS
AGGREGATE DEMAND
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Most economists believe that, in the short run, the greatest impact of a change in taxes is on aggregate supply, not aggregate demand
|
|
|
A permanent change in taxes has a greater effect on aggregate demand than a temporary change in taxes
|
|
|
An increase in taxes shifts the aggregate-demand curve to the right.
|
|
|
A decrease in taxes shifts the aggregate-supply curve to the left
|
Detailed explanation-1: -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-2: -An increase in the money supply, and increase in government purchases, and a cut in personal taxes all cause the aggregate demand curve to shift to the right.
Detailed explanation-3: -Answer and Explanation: The correct answer is A. A decrease in price level. Aggregate demand shifts favorably when the money supply increases and enable more consumer purchasing power.
Detailed explanation-4: -Changes in Income Taxes Income taxes affect the consumption component of aggregate demand. An increase in income taxes reduces disposable personal income and thus reduces consumption (but by less than the change in disposable personal income).