Which of the following happens to aggregate demand if people want to save more for retirement and the government raises taxes?
A)Aggregate demand shifts right.
B)Aggregate demand shifts left.
C)If people save more, aggregate demand shifts right; if the government raises taxes, aggregate demand shifts left.
D)If people save more, aggregate demand shifts left; if the government raises taxes, aggregate demand shifts right.

Question

Quizplus · Accepted Answer

When people save more for retirement, they decrease their consumption expenditure, which leads to a decrease in aggregate demand. When the government raises taxes, it decreases disposable income and also decreases consumption expenditure, leading to a further decrease in aggregate demand. Therefore, both events will shift the aggregate demand curve to the left.

Which of the Following Happens to Aggregate Demand If People