Government actions can cause a
A) shift in the supply curve.
B) shift in the demand curve.
C) reaction from firms in other countries.
D) All of the above.

Question

Quizplus · Accepted Answer

Government actions can affect both the supply and demand of goods and services, which can cause a shift in the supply and demand curves. For example, if the government increases taxes on a product, this would decrease the supply of that product as firms may choose to produce less of it. On the other hand, if the government provides subsidies for a product, this would increase the supply of that product. Additionally, government actions can also impact the demand for goods and services. If the government provides income tax rebates, this would increase the disposable income of consumers, thereby increasing the demand for goods and services. Finally, government actions can create international reactions, such as trade tariffs or sanctions, which may impact the behavior of firms in other countries.

Government Actions Can Cause a