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:

Natural Monopoly

A market condition in which a single company can supply a product or service at a lower cost than any potential competitor, leading to a dominant position that discourages others from entering the market.

Monopoly Power

The ability of a single seller to control market prices and exclude competitors within a particular industry.

Antitrust Policy

Government regulations designed to promote competition and prevent the formation of monopolies or anti-competitive practices.

Price-Fixing

An illegal agreement among competitors to set prices, establish production quotas, or engage in other practices that eliminate or reduce competition within an industry.