A decrease in business taxes will tend to
A) increase aggregate demand but not change aggregate supply.
B) increase aggregate supply but not change aggregate demand.
C) increase aggregate demand and increase aggregate supply.
D) decrease aggregate supply and decrease aggregate demand.

Question

Quizplus · Accepted Answer

A decrease in business taxes can lead to an increase in both aggregate demand and aggregate supply. Lower taxes increase disposable income for consumers, boosting consumption and aggregate demand. Simultaneously, businesses have more capital to invest in production, potentially increasing aggregate supply.

A Decrease in Business Taxes Will Tend to