The passage of new legislation that imposes much less government regulation of business will most likely:...
The passage of new legislation that imposes much less government regulation of business will most likely:
a. Increase aggregate demand
b. Increase aggregate supply
c. Decrease aggregate demand
d. Decrease aggregate supply
Homework Answers
Government regulations works as impediment in the production
process. Excess of government regulations hinders production
activities.
So, if government imposes less government regulations on businesses then it reduces distortion of productive activities to a larger extent.
This encourages businesses to expand production activities and to produce more.
As production increases, aggregate supply also tends to increase.
So,
The new legislation will increase aggregate supply.
Hence, the correct answer is the option (b).
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