When Taxes Increase, Consumption Decreases

question 244

Multiple Choice

When taxes increase, consumption decreases. How is this situation represented in the aggregate demand and aggregate supply model?

• A) by a movement to the left along a given aggregate-demand curve
• B) by shifting aggregate demand to the left
• C) by shifting aggregate supply to the left
• D) by a movement to the right along a given aggregate-demand curve

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Definitions:

Production Possibilities Curve

A graphical representation showing the maximum quantity of two goods that can be produced with available resources and technology, illustrating trade-offs and opportunity costs.

Inefficiently

The state of not achieving maximum productivity with minimum wasted effort or expense.

Efficiently Utilized

Resources or inputs that are used in a way that maximizes the output or outcomes without wasting any potential utility.

Production Possibilities Curve

A graphical representation showing the maximum combination of goods and services that can be produced with a fixed amount of resources.