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Economics (AS & A Level) · Oct / Nov 2023 · Paper 12 · Question 24

9708Fiscal policy

A government increases the rate of income tax. What is the effect, in the short run, on the aggregate demand curve or the aggregate supply curve?

  1. AThe aggregate demand curve shifts left.
  2. BThe aggregate demand curve shifts right.
  3. CThe aggregate supply curve shifts left.
  4. DThe aggregate supply curve shifts right.

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Correct answer: A. The aggregate demand curve shifts left.

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