Higher taxes
A) increase the aggregate quantity demanded.
B) increase aggregate demand.
C) decrease aggregate demand.
D) decrease the aggregate quantity demanded.

Question

Quizplus · Accepted Answer

Higher taxes decrease the disposable income of consumers, reducing their ability to purchase goods and services, leading to a decrease in aggregate demand. Additionally, higher taxes can also decrease business profitability, leading to a decrease in investment spending, which also contributes to a decrease in aggregate demand.

Higher Taxes