A decrease in business taxes,causes the expected profitability of investment projects to __________,which then shifts the AD curve to the __________.
A) rise; right
B) rise; left
C) decline; right
D) decline; left

Question

Quizplus · Accepted Answer

A decrease in business taxes will increase the expected profitability of investment projects, which will encourage businesses to invest more. This increase in investment will shift the AD curve to the right, leading to an increase in output and prices. Therefore, the correct answer is A, rise; right.

A Decrease in Business Taxes,causes the Expected Profitability of Investment