Aggregate demand will decrease if:
A) the aggregate price level falls.
B) the government raises tax rates.
C) productivity declines.
D) the money supply increases.

Question

Quizplus · Accepted Answer

If the government raises tax rates, consumers will have less disposable income to spend, causing a decrease in consumption and a decrease in aggregate demand. Choices A, C, and D would all lead to an increase in aggregate demand, as falling prices, increased productivity, and increased money supply would all stimulate economic activity and increase consumer spending.

Aggregate Demand Will Decrease If