In an aggregate demand-aggregate supply framework, fiscal policy that emphasizes cutting taxes as a means of improving incentives to work, save, and invest would be characterized primarily as a
A)rightward shift of the aggregate demand curve.
B)leftward shift of the aggregate demand curve.
C)rightward shift of the long-run aggregate supply curve.
D)leftward shift of the long-run aggregate supply curve.

Question

Quizplus · Accepted Answer

Cutting taxes to improve incentives to work, save, and invest is likely to increase the productive capacity of the economy, leading to a rightward shift of the long-run aggregate supply curve.

In an Aggregate Demand-Aggregate Supply Framework, Fiscal Policy That Emphasizes