Figure 17.6
-Suppose the federal government reduces income taxes.Assume that the movement from A to B in Figure 17.6 represents normal growth in the economy before the tax change.Also assume that aggregate demand does not change.If the tax change is effective and labour supply and savings increase because of the tax change,then the tax change will

Question

Figure 17.6 
-Suppose the federal government reduces income taxes.Assume that the movement from A to B in Figure 17.6 represents normal growth in the economy before the tax change.Also assume that aggregate demand does not change.If the tax change is effective and labour supply and savings increase because of the tax change,then the tax change will

Quizplus · Accepted Answer

The tax change is expected to increase labor supply and savings, which would increase aggregate supply, leading to a decrease in the price level.

Figure 17.6 -Suppose the Federal Government Reduces Income Taxes.Assume That the Movement