If the multiplier for taxes taxes is negative 1.30 −1.30 and taxes are taxes are increased by $ 150 150 billion, calculate the amount by which the demand curve will ultimately shift. shift of the demand curve = $ nothing billion. (enter your response as an integer and include a minus sign if necessary.) enter your answer in the answer box. save for later

The demand curve will shift to the left thus, decreasing the both, the level of price and the output of the economy.

Explanation:

increase in taxes x tax multiplier = effect of taxes

150 billons x -1.3 = -195 billions

This will make the aggregate demand decrease.

However, if this increase in taxes is backed up with government spending will end up with a positive effect as the governement spending also has a multiplier effect which is greater than tax multiplier by one unit.

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