Question

A tax cut ________ aggregate demand and ________. A. decreases; shifts the AD curve leftward B. decreases; shifts the AD curve rightward C. does not change; does not shift the AD curve D. increases; shifts the AD curve leftward E. increases; shifts the AD curve rightward

Answer 1

E. increases; shifts the AD curve rightward

Explanation:

Tax cut means lower tax income tax rates, that mean individuals will have more of their income, that is more money to spend leading to increase in aggregate demand. This will lead to a rise (increase) in the aggregate demand curve which implies rightward movement.