Which of the following would cause aggregate demand to decrease?
A)The government increases taxes on both business and personal income.
B)There is a reduction in the nation's labour supply.
C)The Bank of Canada increases the amount of money in circulation.
D)Businesses and households believe that the economy is headed for good times,so they begin to feel increased security about their jobs.

Question

Quizplus · Accepted Answer

If the government increases taxes on both business and personal income, it reduces the disposable income of both businesses and households, leading to a decrease in consumption and investment spending, which ultimately leads to a decrease in aggregate demand.

Which of the Following Would Cause Aggregate Demand to Decrease