Tax cuts on business income increase aggregate demand by increasing
A)business investment spending.
B)consumption spending.
C)government spending.
D)wage rates.

Question

Quizplus · Accepted Answer

Tax cuts on business income can lead to an increase in business investment spending, as businesses are able to retain a larger share of their profits and have more funds available for investment. This increase in investment spending can stimulate aggregate demand, as businesses may purchase more capital goods and boost production, leading to increased employment and wages. However, tax cuts on business income may not directly increase consumption spending or government spending, so options B and C are not the best choices. Wage rates may increase indirectly as a result of increased investment spending, but it is not a direct effect of tax cuts on business income, so option D is not the best choice either.

Tax Cuts on Business Income Increase Aggregate Demand by Increasing