Other Things Equal, a Reduction in Personal and Business Taxes

question 123

Multiple Choice

Other things equal, a reduction in personal and business taxes can be expected to

• A) increase aggregate demand and decrease aggregate supply.
• B) increase both aggregate demand and aggregate supply.
• C) decrease both aggregate demand and aggregate supply.
• D) decrease aggregate demand and increase aggregate supply.

---

Definitions:

Consumer Surplus

The difference between the total amount that consumers are willing to pay for a good or service and the total amount they actually pay.

Producer Surplus

The disparity between the minimum amount producers are prepared to take for a product or service and the higher amount they end up getting.

Blockade

An act of sealing off a place to prevent goods or people from entering or leaving, typically implemented as a form of economic or military pressure.

Producer Surplus

The difference between what producers are willing to sell a good for and the actual price they receive.