Consider all the effects on fiscal policy. A cut in the tax on capital income
A)shifts the AD curve rightward.
B)shifts the SAS curve rightward.
C)shifts the LAS curve rightward.
D)all of the above
E)only B and C

Question

Quizplus · Accepted Answer

A cut in the tax on capital income will increase investment, which will shift the AD curve rightward. It will also increase the supply of loanable funds, which will shift the SAS curve rightward. Finally, it will increase the demand for loanable funds, which will shift the LAS curve rightward.

Consider All the Effects on Fiscal Policy