Question

Suppose aggregate demand shifts to the left and policymakers want to stabilize output. What can they do?

Group of answer choices:
O repeal an investment tax credit or decrease the money supply
O institute an investment tax credit or decrease the money supply
O institute an investment tax credit or increase the money supply
O repeal an investment tax credit or increase the money supply

Answer 1

Answer :Institute an investment tax credit or increase the money supply.

Step-by-step explanation:

A shift in aggregate demand to the left indicates a fall in demand and stabilizing output means encouraging production.

To increase the demand is to increase the level of money in circulation to enhance the Consumers purchasing power and instituting investment tax credit will encourage more investors to go into production which will help stabilize output.

Decreasing the money in supply will further shift aggregate demand to the left by reducing the Consumers purchasing power as regards money available and also repealling an investment tax credit will not enhance production nor stabilize output.

Answer 2

O institute an investment tax credit or increase the money supply

Step-by-step explanation:

When the demand curve shifts to the left, it means that demand has fallen. Stabilisation policy that would be carried out would be expansionary; money supply would be increased to stimulate demand.

Investment tax credit reduces the amount of tax owed and thus increases disposable income and increases demand.

Increasing money supply increases demand.

All things been equal, the demand curve should shift to the right.

I hope my answer helps you