Why Does a Tax Change Affect Aggregate Demand

question 40

Multiple Choice

Why does a tax change affect aggregate demand?

• A) A tax change alters saving by an equal amount.
• B) A tax change alters imports and net exports.
• C) A tax change alters government spending by an equal amount.
• D) A tax change alters disposable income and consumption spending.

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Definitions:

Statistical Discrepancy

The difference between two sets of numbers or data points that are expected to be in agreement but are not, due to errors or variances.

Balance of Payments

A financial statement that summarizes a country's transactions with the rest of the world, including trade, investments, and monetary movements, over a specific time period.

Foreign Exchange Market

A global marketplace for trading national currencies against one another.

Euros

The official currency of the eurozone, which consists of 19 of the 27 European Union member states.