What Are the Effects of a Change in Taxes on Consumption

question 65

Multiple Choice

What are the effects of a change in taxes on consumption and aggregate demand?

• A) If taxes increase, consumption increases and aggregate demand shifts right.
• B) If taxes increase, consumption decreases and aggregate demand shifts left.
• C) If taxes decrease, consumption increases and aggregate demand shifts left.
• D) If taxes decrease, consumption decreases and aggregate demand shifts right.

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Definitions:

Tax Per Unit

A specific charge levied on each unit of a product or service, often used by governments to regulate consumption or raise revenue.

Sellers

Individuals or entities that offer goods or services for sale to consumers or other businesses.

Tax

A compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.

Price

The amount of money exchanged for a good or service, influenced by factors like supply and demand, production costs, and market competition.