Suppose a Middle-Class Tax Cut Increases Consumption Expenditures

question 31

Multiple Choice

Suppose a middle-class tax cut increases consumption expenditures.Which of the following would you expect to occur as a result of this change?

• A)The economy will move up and to the left along the short-run Phillips Curve.
• B)The economy will move down and to the right along the short-run Phillips Curve.
• C)​The short-run Phillips Curve will shift to the left.
• D)​The short-run Phillips Curve will shift to the right.

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Definitions:

Price

The amount of money required to purchase a good or service, acting as a signal to both buyers and sellers in the market.

Quantity

The amount or number of a material or immaterial good that is measured or counted.

Market Price

The price at which goods and services are currently being sold in the market, influenced by supply and demand.

Equilibrium Price

The price point in the market at which the amount of goods being offered is equal to the amount of goods being sought.