Taxes on consumers are cut.Instructions: Grab either the AD or AS curve and drag and drop it to a new position to represent the resulting shift in AD or AS.

In the scenario where taxes on consumers are cut, we are likely to see an increase in consumer spending. This increase in disposable income leads to higher demand for goods and services, resulting in a shift in the Aggregate Demand (AD) curve.

Step 1: Identify the Current Situation

Initially, the economy is represented by the original AD curve, which reflects the total spending on goods and services at various price levels.

Step 2: Determine the Effect of Tax Cuts

When taxes are cut, consumers have more disposable income. This will encourage them to spend more, shifting the AD curve to the right. A rightward shift indicates an increase in aggregate demand at every price level.

Step 3: Visual Representation

1. Original AD Curve: Start with the initial AD curve (AD1).
2. Shift AD Curve: Move the AD curve to the right to a new position (AD2) to denote the increase in demand due to consumer tax cuts.

Final Answer

The new position of the AD curve will be to the right of the original AD curve, representing increased consumer spending as a result of the tax cut.