Both Keynesians and real business cycle proponents believe that tax cuts increase output
A)and both agree it does this through increasing aggregate demand.
B)but Keynesians believe it does this through increasing aggregate demand and not aggregate supply.
C)but Keynesians believe it does this through increasing aggregate supply and not aggregate demand.
D)and both agree it does this through increasing aggregate supply.

Question

Quizplus · Accepted Answer

Keynesians believe that tax cuts increase output by increasing aggregate demand through boosting consumption and investment, while real business cycle proponents believe that tax cuts increase output by increasing aggregate supply through incentivizing work and investment. Both believe that tax cuts have a positive impact on output, but differ in their underlying mechanisms.

Both Keynesians and Real Business Cycle Proponents Believe That Tax