Please Explain If the government announces a big tax cut, which of the following

Question

Please Explain

If the government announces a big tax cut, which of the following combinations of events would be most likely to
occur?
a) an upward shift of the aggregate expenditure line (Keynesian AD), a rightward shift in the money demand
curve, and a rightward shift of the aggregate demand curve (the AS/AD)
b) a downward shift ofthe aggregate expenditure line, a leftward shift in the money demand curve, and a leftward
shift ofthe aggregate demand curve
c) an upward shift ofthe aggregate expenditure line, a leftward shift in the money demand curve, and a rightward
shift ofthe aggregate demand curve
d) a downward shift of the aggregate expenditure line, a rightward shift in the money demand curve, and a
rightward shift of the aggregate demand curve

Explanation / Answer

b) a downward shift ofthe aggregate expenditure line, a leftward shift in the money demand curve, and a leftward

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