Taxes on consumers are cut.Instructions: Grab either the AD or AS curve and drag and drop it to a new position to represent the resulting shift in AD or AS.
Question
Taxes on consumers are cut.Instructions: Grab either the AD or AS curve and drag and drop it to a new position to represent the resulting shift in AD or AS.
Solution
When taxes on consumers are cut, consumers have more disposable income. This increase in disposable income leads to an increase in consumption. As consumption is a major component of aggregate demand (AD), a tax cut for consumers will increase AD. Therefore, you should grab the AD curve and shift it to the right to represent the increase in aggregate demand.
Similar Questions
Taxes on the rich are increased.Instructions: Grab either the AD or AS curve and drag and drop it to a new position to represent the resulting shift in AD or AS.
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