Question

We would expect a decline in personal and corporate income taxes to:

A) shift the aggregate demand curve rightward.
B) decrease consumption and investment spending.
C) decrease real output.
D) shift the aggregate supply curve leftward.

Answer 1

A decline in personal and corporate income taxes is expected to a) shift the aggregate demand curve rightward due to increased consumption and investment demand.

Step-by-step explanation:

We would expect a decline in personal and corporate income taxes to shift the aggregate demand curve rightward. This is because tax cuts typically increase disposable income for consumers, leading to higher consumption demand. Moreover, lower corporate taxes can stimulate investment demand as companies have more funds to invest in growth. A higher consumption and investment demand shifts the aggregate demand (AD) curve to the right, which typically results in increased real output and potentially higher price levels.