The aggregate demand and supply curves. The economy is initially at an equilibrium at E0.
the appropriate shift of the curve that shows the effect of the following event:
1. Lower personal tax rates
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Lower personal tax rates will cause the aggregate demand and supply curvesto shift.
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Lower personal tax rates would have an effect on both aggregate demand and aggregate supply curves.
Lower personal tax rates would increase disposable income for individuals, which would lead to an increase in consumer spending. This would shift the aggregate demand curve to the right, as there would be an increase in overall demand for goods and services.
On the other hand, lower personal tax rates would also provide individuals and businesses with more incentives to work and invest. This would result in an increase in aggregate supply as there would be an increase in the production of goods and services.
To summarize, lower personal tax rates would shift both the aggregate demand and aggregate supply curves to the right. As a result, the economy's equilibrium point would shift to a new equilibrium point at a higher level of output and potentially a higher price level, depending on the relative magnitude of the shifts in aggregate demand and supply.