Question and answer
Consider if the government instituted a 10 percent income tax surcharge. In terms of the AS/AD model, this change should have A. shifted the AD curve to the left B. shifted the AD curve to the
right C. made the AD curve flatter D. made the AD curve steeper
It all depends on what the government does with the money. If it spends it in addition to everything it is already spending, then, to first order, there is no change in the aggregate demand or aggregate supply curves. [ In reality, there is a second order effect associated with the spending multiplier for the government vs. the spending multiplier for the private sector. If the
government "destroyed" the money, either literally or using it to replace borrowing, then that would affect both the aggregate demand and aggregate supply curves (changes in money supply affect everyone.) This probably isn't the answer you wanted, but then, you didn't say what context you were using this model in. I tend to think in terms of the real economy and macroeconomics. Most student think in terms of their current course, without reference to reality or the rest of economics, and I don't know what course you are taking. ]
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Original conversation
User: Consider if the government instituted a 10 percent income tax surcharge. In terms of the AS/AD model, this change should have A. shifted the AD curve to the left B. shifted the AD curve to the right C. made the AD curve flatter D. made the AD curve steeper

Weegy: It all depends on what the government does with the money. If it spends it in addition to everything it is already spending, then, to first order, there is no change in the aggregate demand or aggregate supply curves. [ In reality, there is a second order effect associated with the spending multiplier for the government vs. the spending multiplier for the private sector. If the government "destroyed" the money, either literally or using it to replace borrowing, then that would affect both the aggregate demand and aggregate supply curves (changes in money supply affect everyone.) This probably isn't the answer you wanted, but then, you didn't say what context you were using this model in. I tend to think in terms of the real economy and macroeconomics. Most student think in terms of their current course, without reference to reality or the rest of economics, and I don't know what course you are taking. ]
analhon1014|Points 60|

User: Aggregate demand management policies are designed most directly to A. minimize unemployment B. minimize inflation C. control the aggregate level of spending in the economy D. prevent budget deficits or surpluses

Weegy: D. prevent budget deficits or surpluses
danichix|Points 3|

User: Suppose that consumer spending is expected to decrease in the near future. If output is at potential output, which of the following policies is most appropriate according to the AS/AD model? A. An increase in government spending B. An increase in taxes C. A reduction in government spending D. No change in taxes or government spending

Weegy: A. An increase in government spending
Expert answered|andrewpallarca|Points 12724|

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Asked 6/26/2012 12:29:23 PM
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