The initial impact of an increase in an investment tax credit is to shift
A)aggregate demand right.
B)aggregate demand left.
C)aggregate supply right.
D)aggregate supply left.

Question

Quizplus · Accepted Answer

An increase in investment tax credit would encourage businesses to invest more. This would lead to an increase in the aggregate demand since businesses would increase their spending on capital goods (such as machinery, equipment, etc.), which would then create a ripple effect in the economy. This increased spending would boost economic growth, leading to increased employment, output, and income. Therefore, the initial impact of an increase in an investment tax credit is to shift aggregate demand to the right.

The Initial Impact of an Increase in an Investment Tax