Other things equal, a reduction in personal and business taxes can be expected to
A) increase aggregate demand and decrease aggregate supply.
B) increase both aggregate demand and aggregate supply.
C) decrease both aggregate demand and aggregate supply.
D) decrease aggregate demand and increase aggregate supply.

Question

Quizplus · Accepted Answer

A reduction in personal and business taxes increases disposable income and business profits, leading to higher consumption and investment, which boosts both aggregate demand and aggregate supply.

Other Things Equal, a Reduction in Personal and Business Taxes