Other things equal a reduction in personal and business taxe

Other things equal, a reduction in personal and business taxes can be expected to A. increase aggregate demand and decrease aggregate supply. B. lncrease both aggregate demand and aggregate supply OC decrease both aggregate demand and aggregate supply D. decrease aggregate demand and increase aggregate supply

Solution

B. Increase both aggregate demand and aggregate supply.

This is because a reduction in personal taxes would mean that people will have much more income at their disposal to buy more products, thereby increasing the aggregate demand. On the other hand, a reduction in business taxes would mean that businesses will now have more income at their disposal in order to produce more and thereby increasing the supply.