Aggregate demand increases if the quantity of money__________ .
A) decreases or tax rates increase
B) remains constant or tax rates increase
C) increases or tax rates decrease
D) or transfer payments decrease

Question

Quizplus · Accepted Answer

When the quantity of money increases, individuals and businesses have more money to spend, which leads to increased consumption and investment. This, in turn, increases aggregate demand. Additionally, if tax rates decrease, individuals and businesses also have more money to spend, which can also increase aggregate demand. Therefore, choice C is the best answer, as it includes both an increase in the quantity of money and a decrease in tax rates.

Aggregate Demand Increases If the Quantity of Money__________