A. shift aggregate suplly to the left, with the same price level.
B. shift aggregate supply to the left, with a higher price level.
C. shift aggregate supply to the left, reducing GDP and increasing the price level.
D. shift aggregate supply to the right, reducing GDP and the price level.Higher taxes on income and sales, with nothing else changing, will?Vijay is correct, but there one other factor, the %26quot;nothing else changing%26quot;
As a micro-economics question, demand falls with taxes on income and with taxes on sales..
But as a macro-economics question (bringing in the GDP), what is the government doing with all that money it is collecting in taxes?
Economics is all about interconnections and feedback networks, not about simple A implies B.
For example, during World War II, taxes went up, but so did personal expenditures and the GDP
http://www.bea.gov/national/nipaweb/TablHigher taxes on income and sales, with nothing else changing, will?higher taxes means lower disposable income, which cause less consumption; the fall in consumption will cause GDP to fall n eventually AGGREGATE DEMAND; so changes in taxes does not affect aggregate supply; dont be confused
