Suppose that a presidential candidate who promised large personal income tax cuts is elected. Which outcome is MOST likely?Choose one answer from the options below.a decrease in short-run aggregate supplya decrease in aggregate demandan increase in short-run aggregate supplyan increase in aggregate demandBackNext
Question
Suppose that a presidential candidate who promised large personal income tax cuts is elected. Which outcome is MOST likely?Choose one answer from the options below.a decrease in short-run aggregate supplya decrease in aggregate demandan increase in short-run aggregate supplyan increase in aggregate demandBackNext
Solution
The most likely outcome if a presidential candidate who promised large personal income tax cuts is elected would be an increase in aggregate demand.
Here's why:
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When personal income tax is cut, individuals have more disposable income. This means that people have more money to spend.
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When people have more money to spend, consumer spending increases.
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Consumer spending is a major component of aggregate demand, which is the total demand for goods and services within an economy.
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Therefore, when consumer spending increases, aggregate demand also increases.
So, the correct answer is "an increase in aggregate demand".
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