Macroland's Government Reduces Taxes in an Effort to Move Its

Multiple Choice

Macroland's government reduces taxes in an effort to move its economy back to its natural rate of output. According to the AS/AD model, the tax reduction will:

A) stimulate aggregate demand and help resolve a short-run recession.
B) stimulate long-run aggregate supply to reduce inflation.
C) control government spending to reduce inflationary pressures.
D) reduce consumer spending and increase savings, which will resolve a recession.