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25 Oct 2018

What effect would each of the following have on aggregate demand or aggregate supply? Explain.
a. A reduction in personal income tax
b. An increase in payroll taxes paid by the employer

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Patrina Schowalter
Patrina SchowalterLv2
25 Oct 2018
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Related questions

Other things equal, what effect will each of the following have on the equilibrium price level and level of real output?

a. An increase in aggregate demand in the steep portion of the aggregate supply curve.

b. An increase in aggregate supply, with no change in aggregate demand (assume that prices and wages are flexible upward and downward).

c. Equal increase in aggregate demand and aggregate supply.

d. A reduction in aggregate demand in the relatively flat portion of the aggregate supply curve.

e. An increase in aggregate demand and a decrease in aggregate supply.

1. (7 points) Will the following factors influence aggregate supply and/or aggregate demand? Please indicate whether the shift is an increase/decrease/no change in Aggregate Demand (AD) and/or Aggregate Supply (AS).

A. an increased fear of recession.

B. a reduction in the interest rate at each price level.

C. an increase in the world price of oil.

D. a higher price level.

E. a major increase in federal spending on health care.

F. a 10 percent reduction in personal income taxes.

G. a depreciation in the value of the US dollar on the foreign exchange market.

1. Which of the following would most likely increase aggregate supply?

a. an increase in the prices of imported goods

b. an increase in productivity

c. an increase in government subsidies to business

d. a decrease in net exports

Ā 

2. One reason why the aggregate supply curve might shift to the left is that:

a. consumer incomes have increased

b. production costs have increased

c. government spending has increased

d. businesses have become more optimistic

Ā 

3. A reduction in taxes may:

a. increase aggregate demand and decrease aggregate supply

b. increase aggregate demand and increase aggregate supply

c. decrease aggregate demand and decrease aggregate supply

d. decrease aggregate demand and increase aggregate supply

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