ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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raising the sales tax rate
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lowering the salaries tax rate
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abolishing unemployment benefits
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putting more resources into on-the-job training programmes
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Detailed explanation-1: -The rise in government expenditure shifts the aggregate demand curve rightwards, while a reduction in government expenditure shifts the curve to the left.
Detailed explanation-2: -The aggregate demand curve, or AD curve, shifts to the right as the components of aggregate demand-consumption spending, investment spending, government spending, and spending on exports minus imports-rise. The AD curve will shift back to the left as these components fall.
Detailed explanation-3: -The tax cut, by increasing consumption, shifts the AD curve to the right.
Detailed explanation-4: -Option A) The policy of the government that will increase the personal income taxes will cause AD to decrease and shift parallelly to the left. This is because the rise in income taxes will cause the disposable income (Yd) of the consumers to fall.
Detailed explanation-5: -1. An increase in the money supply, and increase in government purchases, and a cut in personal taxes all cause the aggregate demand curve to shift to the right.