Question

4. Use AS and AD curves to show why President Trump and his supporters believe that a tax cut will not lead to higher inflation even when an economy begins at full employment.   

Answer 1

As per the POTUS and his supporter the tax cut will benefit both the consumer and producer in the economy equally, this will shift the AD curve because a tax cut will improve the disposable income and shift the demand curve to the right and the SRAS curve will shift to the right because lower tax will make the production easier and they can produce at a lower price.

So, both the AD and SRAS shifting to the right will increase the quantity and and keep the price as it is. Leading to benefit the economy but not increasing the price level.