Question

an increase in the tax rate in the Keynesian model will
(1) shift the aggregate spending curve upwards in a parallel way
(2) shift the consumption curve upwards in a parallel way
(3) not affect the aggregate spending curve
(4) swivel the aggregate demand curve downwards

Answer 1

(4) swivel the aggregate demand curve downwards

In the Keynesian model, when there is an increase in the tax rate, the consumer income will make the consumption to come down which will the push the aggregate demand curve to the left. The shifting of the aggregate demand curve to the left means that it moves downwards, thus the correct choice is (4) swivel the aggregate demand curve downwards