Asked by Courtlyn Patrick on May 31, 2024
Verified
Other things the same, an increase in taxes shifts aggregate demand to the left. In the short run this makes output fall which makes the interest rate rise.
Aggregate Demand
The total demand for all goods and services within a particular economy at a given overall price level and in a given time period.
Interest Rate
The percentage at which interest is paid by a borrower for the use of money they borrow from a lender, often expressed as an annual percentage rate (APR).
- Understand the effects of changes in taxes and government spending on aggregate demand.
Verified Answer
ZK
Zybrea KnightJun 04, 2024
Final Answer :
False
Explanation :
An increase in taxes shifts aggregate demand to the left, which in the short run can lead to a decrease in output and a decrease in the demand for money, potentially leading to a lower interest rate, not a rise.
Learning Objectives
- Understand the effects of changes in taxes and government spending on aggregate demand.