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Suppose Higher Taxes on Businesses Cause a Decrease in Spending

Question 91

Multiple Choice

Suppose higher taxes on businesses cause a decrease in spending on plant and equipment.How will this affect the aggregate expenditure (AE) and the aggregate demand (AD) schedules?


A) AE shifts up; AD shifts to the left
B) AE shifts down; AD shifts to the left
C) AE shifts up; AD shifts to the right
D) AE shifts down; AD shifts to the right

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