contestada

which of the following statements regarding taxes is correct? a. most economists believe that, in the short run, the greatest impact of a change in taxes is on aggregate supply, not aggregate demand. b. a permanent change in taxes has a greater effect on aggregate demand than a temporary change in taxes. c. a decrease in taxes shifts the aggregate-supply curve to the left. d. an increase in taxes shifts the aggregate-demand curve to the right.

Respuesta :

snehashish65

The impact of a tax reform on overall demand is greater when it is permanent as opposed to temporary. Thus, option B is correct.

What permanent change in taxes has a greater effect?

Demand declines as a result of higher taxes, since customers have less money to spend. Because the government has less money to spend on roads due to lower taxes, trade is reduced.

Since lower taxes boost consumption, total spending, and income, while higher taxes decrease these factors, the tax multiplier has a negative sign.

As a result of the government being unable to hire as many people, lower taxes create unemployment.

Therefore, a permanent change in taxes has a greater effect on aggregate demand than a temporary change in taxes.

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