Explain how aggregate demand changes when the government increases taxes by $100 billion. Aggregate demand .

D. decreases by less than $100 billion because the tax multiplier is negative

Explanation:

If the Government were to increase taxes then it would reduce the amount of money for spending (disposable income) that people have to be able to buy goods and services.

As a result they will buy less goods and services but this would be less than the $100 billion tax imposed on them because the effect of the tax multiplier is negative.

Tax Multiplier = -Marginal Propensity to Consume / (1 - MPC)

hello the answer is d