True False or uncertain and explain why in 3 sentences or more.
1)A decrease in the (net of transfers) tax rate on national income causes the aggregate demand curve to shift to the right.
2)Unless the economy is composed solely of price-making firms, the short run aggregate supply curve is upward sloping.
As the tax rate falls, the disposable income in the hand of the people will increase with a higher income the consumption will increase and that will shift the aggregate demand curve to the right. It will increase the price and output in the market.
Even if the economy is made up of the firms that are price takers the short run aggregate supply curve is upward sloping. that is because as we go on increasing the output more and more resources are employed and the price of those resources rise. making the curve slope upward.
Get Answers For Free
Most questions answered within 1 hours.