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Policies That Deter Investment Such as an Increase in the Corporate

Question 93

Multiple Choice

Policies that deter investment such as an increase in the corporate profit tax rate,

A) will increase aggregate demand due to increased tax revenue, and eventually shift the long-run aggregate supply (LRAS) curve to the right.
B) will reduce aggregate demand, and eventually shift the LRAS curve to the left.
C) will initially increase aggregate demand due to increased tax revenue, but eventually shift the long-run aggregate supply (LRAS) curve to the left.
D) will initially reduce aggregate demand, but eventually shift the LRAS curve to the right as firms raise prices to compensate for the tax increase.

Correct Answer: