A government introduces two alterations to income tax. 1 The individual tax-free income allowance is raised. 2 The marginal rate of income tax is lowered. How will these changes affect aggregate demand and aggregate supply in the economy?
- Aaggregate demand: decrease; aggregate supply: increase
- Baggregate demand: decrease; aggregate supply: unchanged
- Caggregate demand: increase; aggregate supply: increase
- Daggregate demand: increase; aggregate supply: unchanged