Answer :
Consumption rises, but not to the same extent as the change in disposable personal income, and aggregate demand rises when income taxes are reduced.
How is the aggregate expenditure line affected by an increase in taxes?
The multiplier will decrease, and the aggregate expenditures curve will become flatter as income tax rates rise. As a result, the aggregate expenditures curve goes down as a result of a higher income tax rate. Similarly, a steeper aggregate expenditures curve is created when the income tax rate is reduced.
What are impacts of bringing down charges and expanding government spending?
The economy will likely see an increase in both income and spending if the government adopts an expansionary policy, lowers tax rates, and increases spending on goods and services. However, expansionary fiscal policy is contentious because it is likely to raise government debt.
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