right, thus increasing the level of economic activity and output. When individuals see a reduction in their personal tax rates, they have more disposable income, which they can use for consumption, investment, or savings. This increase in spending leads to an increase in demand for goods and services, which, in turn, stimulates production and employment. As a result, the aggregate demand curve shifts to the right, as producers try to keep up with the increased demand.
Overall, lower personal tax rates tend to have a positive impact on economic growth. However, other factors, such as government spending, trade policies, and monetary policy, also play a role in determining the level of economic activity in a given economy.
Lower personal tax rates, the aggregate demand curves shift tothe.
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This will result in---gap.
This will result in closing the output gap. A positive output gap occurs when actual output exceeds the potential output of the economy. This often leads to inflation, as demand for goods and services outstrips the economy's ability to produce them. By increasing aggregate demand through lower personal tax rates, the output gap is reduced, allowing the economy to operate at a level closer to its potential. This can lead to a more stable economic environment with lower inflationary pressures.
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