Question

When congress increases taxes, private investment is crowded out causing ad to shift less than expected. crowded out causing ad to shift more than expected. crowded in causing ad to shift less than expected. crowded in causing ad to shift more than expected. indeterminate with the information given?

Answer 1

When congress increases taxes, private investment is crowded out causing ad to shift more than expected. When workers are hit with higher taxes, they tend to have less incentive to work. That said, the portion of savings is more dependent on the weather or not they are predisposed to save strongly.