Econ Q

All else equal, aggregate demand is most likely to decrease in response to a decrease in: A) interest rates B) federal tax revenues C) expected corporate profits

That’s a goodie. George Soros would definitely say B or C, claiming a reflexive relationship (lower profits and revenues means bad times ahead, so tighten the belt!)

Let say which comes first, a decrease in corporate profit leads to a decrease in AD and federal tax revenue if there was no cutting in the tax scheme. So the answer is C, it is based on the common sense not Soros.

who is to say that the fall in tax revenues is not coming from a cut in the tax rate? Thus, answer is C.


Correct Answer is C

Good question, I was able to guess C only by process of elimination. I still don’t really get why it’s C though…I’ll have to look it up.