In an aggregate demand-aggregate supply framework, fiscal policy that emphasizes cutting taxes as a means of improving incentives to work, save, and invest would be characterized primarily as a:
A) Rightward shift of the aggregate demand curve
B) Leftward shift of the aggregate demand curve
C) Rightward shift of the long-run aggregate supply curve
D) Leftward shift of the long-run aggregate supply curve

Question

Quizplus · Accepted Answer

Cutting taxes to improve incentives to work, save, and invest is likely to increase the productive capacity of the economy, leading to a rightward shift of the long-run aggregate supply curve.

In an Aggregate Demand-Aggregate Supply Framework, Fiscal Policy That Emphasizes