What effect would an increase in business tax rates,combined with a decrease in consumer confidence,have on aggregate demand (AD)?
A)AD would increase.
B)AD could either increase or decrease, depending on which change was of a greater magnitude.
C)AD would decrease.
D)AD would stay the same.

Question

Quizplus · Accepted Answer

An increase in business tax rates would reduce firms' profits, limiting their ability to invest and hire, thereby reducing aggregate demand. Additionally, a decrease in consumer confidence would lead individuals to spend less on goods and services, further reducing aggregate demand. This would result in a decrease in AD.

What Effect Would an Increase in Business Tax Rates,combined with a Decrease