When taxes increase,interest rates
A)increase,making the change in aggregate demand smaller.
B)increase,making the change in aggregate demand larger.
C)decrease,making the change in aggregate demand smaller.
D)decrease,making the change in aggregate demand larger.

Question

When taxes increase,interest rates​
A)​increase,making the change in aggregate demand smaller.
B)​increase,making the change in aggregate demand larger.
C)​decrease,making the change in aggregate demand smaller.
D)​decrease,making the change in aggregate demand larger.

Quizplus · Accepted Answer

When taxes increase, disposable income decreases, which leads to a decrease in aggregate demand. To offset this decrease, the central bank may increase interest rates to make borrowing more expensive and reduce spending. This will make the change in aggregate demand smaller.

When Taxes Increase,interest Rates​

When Taxes Increase,interest Rates