Suppose the government increases lump sum taxes

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Reference no: EM131095944

Suppose the government increases lump sum taxes. This causes

a. disposable income decrease, which causes aggregate supply to decrease.

b. government spending to decrease, which causes aggregate demand to decrease.

c. disposable income to decrease, which causes consumption spending to decrease and aggregate demand to decrease.

d. consumption spending to decrease and spending on imports to increase, The effect on aggregate demand depends on whether domestic spending or spending on imports decreased the most.

Reference no: EM131095944

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