Question

Suppose taxpayers are given a one-time only rebate on previous taxes paid. If consumers spend all of their tax rebate checks, what takes place in the economy?
A.

Aggregate demand shifts to the right.


B.

The LRAS curve shifts left.


C.

Aggregate demand shifts to the left.


D.

Inflation decreases.

Answer 1

Answer:

Aggregate demand shifts to the right.

Explanation:

Tax rebate means that the people have a tax benefit that increases their disposable income.

When there is additional income available for people to spend, there is an increased demand that shifts to the right the aggregate demand curve.

It is unconnected to the supply curve and inflation so the correct answer is option A.

Hope that helps.