The AD-AS model can be used to analyze the effects of fiscal policy, including changes in government spending or taxes. Suppose Congress votes to decrease corporate income tax rates. Use the AD/AS model to analyze the likely impact of the tax cuts on the macroeconomy. Show graphically and explain your reasoning. What exactly causes AD and/or AS to shift? What happens to GDP and the aggregate price level? Why?
Rubric
| Criteria | Not Evident | Developing | Proficient | Distinguished | Weight |
| Explain the Keynesian perspective on tax cuts and show graphically. | 4
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| Explain the Neoclassical Perspective on tax cuts and show graphically. | 4 | ||||
| Explain the effect of tax cuts on GDP. Show graphically. | 4 | ||||
| Explain the effect of tax cuts on the price level. Show graphically. | 4 | ||||
| Write up your analysis using correct language, explaining all your work. | 4 | ||||
| Total: 20 |
