When Taxes Go Down, Then Output Increases, Causing the Aggregate

question 95

Multiple Choice

When taxes go down, then output increases, causing the aggregate supply curve to shift to the right. Conversely, when taxes go up, then output decreases, causing the aggregate supply curve to shift to the left. This relationship is emphasized by

• A) politicians
• B) all economists.
• C) Keynesian economists.
• D) supply-side economists.
• E) Milton Friedman.

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Definitions:

Inflation

The tempo of growth in global prices for products and services, diluting consumer spending ability.

World Price of Oil

The universally recognized current price at which a barrel of oil can be bought or sold for immediate delivery across global markets.

Aggregate-supply Curve

A curve showing the total quantity of goods and services that producers in an economy are willing to supply at various price levels.

Phillips Curve

A concept in economics that demonstrates an inverse relationship between the rate of unemployment and the rate of inflation.