An decrease in taxes shifts aggregate demand
A)to the right.The larger the multiplier is,the farther it shifts.
B)to the right.The larger the multiplier is,the less it shifts.
C)to the left.The larger the multiplier is,the farther it shifts.
D)to the left.The larger the multiplier is,the less it shifts.

Question

Quizplus · Accepted Answer

A decrease in taxes increases disposable income, leading to an increase in consumption and in turn an increase in aggregate demand. The larger the multiplier is (meaning the more responsive consumers are to changes in income), the farther the shift in aggregate demand will be. Therefore, choice A is correct.

An Decrease in Taxes Shifts Aggregate Demand