An investment tax credit, which lowers taxes for firms that invest in new capital equipment, would shift the long-run aggregate supply curve of an economy to the right over time.

Question

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By lowering taxes for firms that invest in new capital equipment, the investment tax credit would encourage more investment and increase the economy's capital stock. This increases the economy's productive capacity, shifting the long-run aggregate supply curve to the right over time.

An Investment Tax Credit, Which Lowers Taxes for Firms That