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A Decrease in Taxes Will Shift Aggregate Demand to the _____

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Short Answer

A decrease in taxes will shift aggregate demand to the _____, cause consumption to _____, and cause output to _____. Due to the crowding-out effect, investment will _____.


Definitions:

Elastic Supply

Describes a situation where the quantity supplied of a good changes significantly when its price changes.

Tax Burden

The measure of the financial charge or impact of taxes on an individual or a corporation.

Excise Tax

A tax on specific goods or services, such as tobacco, alcohol, and gasoline, designed to raise revenue and/or discourage consumption of certain products.

Equilibrium

A state in which the conflicting forces of demand and supply are in balance. When a market is in equilibrium, the decisions of consumers and producers are brought into harmony with one another, and the quantity demanded will equal the quantity supplied.

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