All else equal, AD is most likely to decrese in response to a decrese in A) Interest rate B) Federal tax revenues C) Expected corporate profits Answer given is C… and it says AD will decrese as company will have less revenues for newrwer investments… —> Agreed on this If Federal tax revenues fall… govt will decrese spending ( on infrastructure) since it has less money…so the AD will fall…or the govt can borrow money and simulate demand… I know there is a missing link here…Pls clarify Thanks…!!
decrease in fed tax rev, increase in ppl spending power, increase in demand.
Decrease in fed tax rev = lower taxe rate and people retain more of their income = increased spending = increase in AD