Question

A cut in taxes _____, shifting the aggregate demand curve to the _____. increases corporate profits and investment; left increases disposable income and consumption; right decreases government transfers and consumption; right decreases the marginal propensity to save, increasing consumption; left

Answer 1

Answer:

Increases disposable income and consumption; right

Explanation:

A reduction in the taxes by the government of a particular nation will increase the disposable income of the consumers of that nation. A disposable income refers to the income of the consumer after deducting the taxes.

Hence, if the disposable income of the consumer increases then as a result this will increase the purchasing capacity of the consumers and  the demand for goods & consumption level also increases.

Due to this increase in the disposable income and consumption level, there is a rightward in the aggregate demand curve.