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:

Dishonor

In financial contexts, the refusal or inability of a party to pay a debt when due or to accept a bill of exchange when presented.

Material Addition

An amendment or addition to a contract that considerably changes the terms or obligations originally agreed upon.

UCC

Uniform Commercial Code, a comprehensive set of laws governing commercial transactions in the United States.

Endorsement

A signature or statement of support for a policy, idea, or candidate, or in the context of financial instruments, the act of signing over rights to another party.