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Unformatted text preview: fall. c. Aggregate Supply shifts right. There is an increase in the aggregate output supplied at each price level. Therefore, aggregate output increases and the price level falls. d. Aggregate Supply shifts left as the costs of production have risen. Therefore, aggregate output falls and the price level rises Problem 16: Lower tax rates were intended to increase after-tax earnings and thus increase incentives for resource owners to provide labor and capital. The resulting rightward shift in Aggregate Supply would increase aggregate output and lower the price level. The increase in after-tax earnings would also increase Aggregate Demand, which would increase aggregate output and raise the price level. The overall impact on the price level would depend on the relative sizes of the shifts in the aggregate supply and the aggregate demand....
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This note was uploaded on 07/14/2008 for the course ECON 2301 taught by Professor Butler during the Summer '08 term at Blinn College.
- Summer '08