If a Tax Cut Increases Aggregate Demand More Than Aggregate

question 32

Multiple Choice

If a tax cut increases aggregate demand more than aggregate supply, real GDP_{--------------------} and the price level _{--------------------}.

• A)increases; falls
• B)decreases; rises
• C)increases; rises
• D)decreases; falls
• E)increases; does not change

---

Definitions:

Sales

The overall income produced through the sale of a company's products or services.

Debt-To-Equity Ratio

A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets.

Creditors

Individuals or institutions that lend money or extend credit to others, expecting repayment in the future.

Price-Earnings Ratio

A valuation ratio of a company's current share price compared to its per-share earnings.