Question
Assume that the government decides to stimulate production by reducing the taxes on businesses. How does this policy action affect the short-run aggregate supply curve
Assume that the government decides to stimulate production by reducing the taxes on businesses. How does this policy action affect the short-run aggregate supply curve and the aggregate output?
a. The short-run aggregate supply curve shifts rightward, increasing the aggregate output.
b. The short-run aggregate supply curve shifts leftward, increasing the aggregate output.
c. The short-run aggregate supply curve shifts rightward, decreasing the aggregate output.
d. The short-run aggregate supply curve does not change because of the wage and price rigidity assumption.
e. The short-run aggregate supply curve shifts leftward, decreasing the aggregate output.
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