Exhibit 17-4

-Refer to Exhibit 17-4 Assume that the starting point in graphs (a) and (b) in Exhibit 17-4 is point 1. After a decrease in income taxes,there would be a ______________________ which would cause a movement along the production function from point 1 to point ______________. The result would be a shift of the LRAS curve from LRAS₁ to _______________ resulting in _______________..

Question

Exhibit 17-4

-Refer to Exhibit 17-4 Assume that the starting point in graphs (a) and (b) in Exhibit 17-4 is point 1. After a decrease in income taxes,there would be a ______________________ which would cause a movement along the production function from point 1 to point ______________. The result would be a shift of the LRAS curve from LRAS₁ to _______________ resulting in _______________..

Quizplus · Accepted Answer

A decrease in income taxes is a supply-side policy designed to increase incentives to work, save, and invest. This would lead to an increase in labor supply, shifting the labor supply curve rightward from SL₁ to SL₂. The movement along the production function from point 1 to point 2 would reflect an increase in output due to the increase in labor supply. As a result, the LRAS curve would shift rightward from LRAS₁ to LRAS₂, leading to economic growth.

Exhibit 17-4 -Refer to Exhibit 17-4 Assume That the Starting Point in