Suppose the government increases taxes. One effect of this change is that it decreases
A. disposable income, which decreases consumption expenditure and aggregate demand.
B. government expenditure, which decreases aggregate demand.
C. the size of the government expenditure multiplier.
D. disposable income which then decreases aggregate supply.
Answer:A
Suppose the government increases taxes. One effect of this change is that it decreases
A. disposable income, which decreases consumption expenditure and aggregate demand. B. government expenditure, which decreases aggregate demand. C. the size of the government expenditure multiplier. D. disposable income which then decreases aggregate supply.