Using the Aggregate Demand-Aggregate Supply Model, Predict What Happens in the Short

Multiple Choice

Using the aggregate demand-aggregate supply model, predict what happens in the short run when the federal government lowers the capital gains tax to stimulate investment.

A) The aggregate demand curve shifts left; the aggregate supply curve is not affected; price level and real GDP decrease.
B) The aggregate demand curve shifts right; the aggregate supply curve is not affected; price level and real GDP increase.
C) The aggregate supply curve shifts left; the aggregate demand curve is not affected; price level increases; real GDP decreases.
D) The aggregate supply curve shifts right; the aggregate demand curve is not affected; price level decreases; real GDP increases.