Question

Raising taxes is an example of ______ policy that shifts the aggregate demand curve ______ expansionary...

Raising taxes is an example of ______ policy that shifts the aggregate demand curve ______

expansionary fiscal; right

contractionary fiscal; left

expansionary monetary; right

contractionary monetary; left
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Answer #1

Increasing taxes is an example of contractionary fiscal policy where people will have less disposable income as a result of which the consumption will be less with which the demand for products reduces as a result of which the aggregate demand shift to the left.

Therefore (b) is the answer

Expansionary fiscal policy includes reduction of taxes and shift of demand curve to the right and that is the reason why

(a) is wrong

monetary policy is not concerned with taxes and rather it is concerned with interest rates and money supply and that's why

(c,d) are wrong

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