If a Tax Cut Increases Aggregate Demand More Than Aggregate

question 156

Multiple Choice

If a tax cut increases aggregate demand more than aggregate supply,real GDP ________ and the price level ________.

• A)increases;rises
• B)increases;falls
• C)decreases;rises
• D)decreases;falls
• E)increases;does not change

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Definitions:

Agency Problem

A conflict of interest inherent in any relationship where one party is expected to act in another's best interests, such as between shareholders and management.

Corporate Behavior

The actions, strategies, and practices of companies in pursuit of their business goals, affecting stakeholders internally and externally.

Ethics

A set of moral principles that govern the behavior of individuals or organizations and guide decision-making and conduct.

Stakeholders

Stakeholders are individuals, groups, or organizations that have an interest in the performance and actions of a company, which can include shareholders, employees, customers, and suppliers.