Question

If the government decides to increase personal income tax to raise its tax revenue, what will be the impact on the economy?
1.Both the price level and the equilibrium level of real output will decrease.
2.Both aggregate demand and aggregate supply will increase.
3.Price level will increase, and total production will decrease.
4.Price level will decrease, and total production will increase.

Answer 1

3.Price level will increase, and total production will decrease.