How do changes in taxation impact aggregate demand when considering the concept of crowding out in an economy?

Changes in taxation can significantly impact aggregate demand, which is the total demand for goods and services in an economy. When taxes are lowered, people have more money to spend, leading to increased consumption and higher aggregate demand. However, if the government increases its spending to stimulate the economy, this can sometimes lead to crowding out, where private investment decreases because the government is borrowing more money. For example, if the government spends a lot on building roads, it might raise taxes to pay for it, causing people to spend less on their own needs. This balance between government spending and private spending is crucial in determining the overall effect on aggregate demand.