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.

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Definitions:

Contrast Effect

A psychological phenomenon wherein the perception or judgment of something is influenced by the comparison with something else, often leading to exaggeration of differences.

Appeal to Fear

A persuasive technique that attempts to influence people’s behavior by making them feel afraid of the consequences of not taking a particular action.

Feared Consequence

The anticipated negative outcome that one believes will occur as a result of certain actions or events.

Persuasive

Having the ability to convince or influence others to believe or do something through reasoning or the appeal to emotions.