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Why would a tax cut would shift the aggregate demand curve outward showing an increase in aggregate demand?
Personal taxation is a amount taken by the Government or State from an individuals income. A cut in taxes would mean that people effectively have more income, therefore more income can be spent on goods and services. This ability for consumers to spend more means that they will demand more, shifting the aggregate demand curve to the right.
It is the same in a business sense. If there was to be tax cuts for businesses, businesses have the ability to spend more in turn increasing aggregate demand.
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Why doesn't an increase in aggregate demand translate directly into an increase in real GDP?
Why doesn't an increase in aggregate demand translate directly into an increase in real GDP
An increase in interest rates affects aggregate demand by?
An increase in interest rates decreases the aggregate demand shifting the curve to the left.
What happens with a decrease in aggregate demand?
Aggreagate demand will increase.
What is demand push inflation?
Demand-pull is caused by an increase in aggregate demand.
What will happen if Aggregate demand increases and aggregate supply decreases?
An increase in aggregate demand and a decrease in aggregate supply will result in a shortage: there will be more goods and services demanded than that which is being produced.
How inflation arises through an outward shift of an aggregate demand curve?
no
Why doesn't an increase in aggregate demand translate directly into an increase in real GDP?
Why doesn't an increase in aggregate demand translate directly into an increase in real GDP
An increase in interest rates affects aggregate demand by?
An increase in interest rates decreases the aggregate demand shifting the curve to the left.
What happens with a decrease in aggregate demand?
Aggreagate demand will increase.
What is demand push inflation?
Demand-pull is caused by an increase in aggregate demand.
What will happen if Aggregate demand increases and aggregate supply decreases?
An increase in aggregate demand and a decrease in aggregate supply will result in a shortage: there will be more goods and services demanded than that which is being produced.
What will happen if Aggregate demand increases and aggregate supply increases?
An increase in aggregate demand and a decrease in aggregate supply will result in a shortage: there will be more goods and services demanded than that which is being produced.
An increase in taxes shifts the aggregate demand curve to the?
Left
Cause the aggregate demand curve to shift outward?
Real shocks will determine the direction of the long-run aggregate demand curve. A real shock is an event or certain factors that cause more or less production. A war, for instance will halt factories from producing goods and will cause the aggregate demand curve to shift left. Higher production will lead to an outward shift to the right.
Because tax cuts will likely affect both aggregate demand and aggregate supply does it matter which is affected more?
Because a tax increase will cause consumption to decrease, an aggregate demand has a greater effect.
Using the AD-AS framework what is the impact on equilibrium price and output when there are increase in aggregate demand and aggregate supply simultaneously?
AD-AS represents aggregate demand curve (AD) and aggregate supply curve (AS). "In the aggregate demand-aggregate supply model, each point on the aggregate demand curve is an outcome of the IS-LM model for aggregate demand Y based on a particular price level. Starting from one point on the aggregate demand curve, at a particular price level and a quantity of aggregate demand implied by the IS-LM model for that price level, if one considers a higher potential price level, in the IS-LM model the real money supply M/P will be lower and hence the LM curve will be shifted higher, leading to lower aggregate demand; hence at the higher price level the level of aggregate demand is lower, so the aggregate demand curve is negatively sloped
Aggregate supply curve is perfectly inelastic an increase in agregate demand will lead to?
Inflation.
