Answered

Read the sentence.
The government decides to raise taxes to spend more on programs.

What effect will this most likely have on the economy?

A. Raising taxes will increase aggregate demand.
B. Raising taxes will decrease aggregate demand.
C. Raising taxes will increase inflation.
D. Raising taxes will decrease the market price equilibrium.



Answer :

GinnyAnswer

Final answer:

Raising taxes decreases aggregate demand in the economy.


Explanation:

Raising taxes will decrease aggregate demand. When the government raises taxes, it takes more money from individuals and businesses, reducing their disposable income. This decrease in disposable income leads to lower consumer spending and investment, ultimately lowering the overall demand in the economy.


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