An increase in net taxes will increase public saving.
The difference between taxes raised and government spending; public saving is positive when there is a budget surplus, but negative when there is a budget deficit.
Increased income taxes lower personal income, which in turn lowers consumption. Thus, the initial change in consumption caused by the change in income taxes multiplied by the multiplier causes a leftward shift in the aggregate demand curve.
The government's function of making purchases is unaffected by changes in disposable income. The quantity of disposable income declines as net taxes rise.
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