A tax rate cut, increase in government purchases, and creating an investment tax credit would shift:

Question

Quizplus · Accepted Answer

A tax rate cut and increase in government purchases would directly increase aggregate demand. Creating an investment tax credit would indirectly increase aggregate demand by incentivizing businesses to invest in capital goods, which would increase aggregate supply in the long run. Therefore, all three policies would shift both the aggregate supply and aggregate demand curves.

A Tax Rate Cut, Increase in Government Purchases, and Creating