If for any given inflation rate,the federal government lowered taxes,________.
A)it would have a similar qualitative result on output as an increase in government purchases
B)it would raise disposable income leading to higher consumption spending
C)the aggregate demand curve would shift to the right
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

Lowering taxes increases disposable income, which leads to higher consumption spending. This increase in consumption spending has a similar effect on output as an increase in government purchases, both of which shift the aggregate demand curve to the right.

If for Any Given Inflation Rate,the Federal Government Lowered Taxes,________