Multiple choice

A politician proposes reducing business taxes, a move she says will encourage risk taking entrepreneurship. The proposed cut in business taxes is intended to stimulate the economy mainly through

  1. an increase in aggregate supply

  2. a decrease in aggregate supply

  3. a decrease in the aggregate demand

  4. an increase in aggregate demand
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A Correct answer
Explanation

Aggregate Supply (AS) measures the volume of goods and services produced within the economy at a given overall price level. There is a positive relationship between aggregate supply and the general price level.

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