Which of the following decreases aggregate demand and shifts the AD curve leftward?

• A. An increase in personal income taxes
• B. An increase in government spending
• C. A rise in consumer confidence
• D. A decrease in interest rates

Answer: (A)

Verified step by step guidance

1. Understand that aggregate demand (AD) represents the total quantity of goods and services demanded across all levels of an economy at a given overall price level and in a given period.
2. Recall that factors which decrease consumers' disposable income or reduce spending tend to decrease aggregate demand, shifting the AD curve to the left.
3. Analyze each option: An increase in personal income taxes reduces consumers' disposable income, leading to lower consumption and thus a decrease in aggregate demand.
4. Recognize that an increase in government spending, a rise in consumer confidence, and a decrease in interest rates generally increase aggregate demand, shifting the AD curve to the right.
5. Conclude that among the options, only an increase in personal income taxes decreases aggregate demand and shifts the AD curve leftward.