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Arrange the following steps in proper sequence with respect to the change in taxes:

A. Decrease in taxes.

B. Shift the aggregate expenditure curve upwards.

C. Increase in disposable income.

D. Negative tax multiplier effect.

Choose the correct answer from the options given below:

Solution

✅ Correct Option: 1

Taxes decrease (A), which raises disposable income (C). The tax multiplier, which is negative, then operates so that the fall in taxes raises income and spending (D), shifting the aggregate expenditure curve upwards (B). Sequence: A, C, D, B.

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