Question

an increase in personal income tax rates will cause a(n): select one: a. increase (or shift right) in aggregate demand b. decrease in the quantity of real output demanded (or movement up along ad) c. increase in the quantity of real output demanded (or movement down along ad) d. decrease (or shift left) in aggregate demand

Answer 1

An increase in personal income tax rates results in less disposable income for consumers, leading to a decrease in consumption and a leftward shift in the aggregate demand curve.

Step-by-step explanation:

An increase in personal income tax rates will typically decrease consumption demand since individuals have less disposable income. This reduction in consumption leads to a decreased aggregate demand in the economy. Therefore, an increase in personal income tax rates will cause a decrease (or shift left) in the aggregate demand curve. Tax policy changes, like those leading to an increase in taxes, will lower consumer expenditures and investment demand, thereby contracting the AD curve leftward.