20. The country of Polivia has a proportional tax structure, under which income

Question

20. The country of Polivia has a proportional tax structure, under which income is taxed at a fixed rate, t. The graph shows the aggregate demand curve (AD1) for the country under the current tax rate. The current price level is 4 and the level of real GDP/income is $6 trillion. Show the impact on aggregate demand if the government of Polivia lowers the tax rate. Using the line tool, draw the new aggregate demand curve for P -1, 2, 3, 4, 5 and 6. Label the new curve AD2. Coordinates: (12.00 ,7.00) AD1 AD2 Unselected M snapping 10 12 Real GDP (tr ons of dollars) Erase All

Explanation / Answer

if it lowers tha tax rate than AD will shift outwards. Lower taxes implies higher income and ultimately higher consumption.

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.