Using the Aggregate Demand-Aggregate Supply Model, Predict What Happens in the Short

question 76

Multiple Choice

Using the aggregate demand-aggregate supply model, predict what happens in the short run when the federal government lowers the capital gains tax to stimulate investment.

• A) The aggregate demand curve shifts left; the aggregate supply curve is not affected; price level and real GDP decrease.
• B) The aggregate demand curve shifts right; the aggregate supply curve is not affected; price level and real GDP increase.
• C) The aggregate supply curve shifts left; the aggregate demand curve is not affected; price level increases; real GDP decreases.
• D) The aggregate supply curve shifts right; the aggregate demand curve is not affected; price level decreases; real GDP increases.

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Definitions:

Oxygen

A chemical element with symbol O and atomic number 8, essential for respiration in animals and plants and a component of the Earth's atmosphere.

Oxygen Consumption

The rate at which oxygen is used by tissues, an important measure of metabolic activity and energy expenditure in organisms.

Metabolic Rate

The rate at which the body burns calories to sustain life, including processes such as breathing, circulation, and cell production.

Surface Area

The measure of the total area that the surface of an object occupies.