A government enacts a policy that increases taxes on businesses. It then uses the entirety of this new revenue to fund a comprehensive upgrade to the nation's public education system and transportation networks over the next decade. Assuming these investments lead to a significant increase in average worker productivity, what is the most likely long-term consequence for the economy's price-setting (PS) curve?

Comparative Analysis of Fiscal Policies

Productivity Effects of Fiscal Policy

A government increases taxes and invests the revenue in public infrastructure. Arrange the following events to show the logical long-term causal chain that leads to an upward shift in the price-setting (PS) curve.

Short-Term vs. Long-Term Effects of Taxation on the Price-Setting Curve

A government enacts a new tax on businesses. Match each distinct phase or use of the resulting revenue with its most likely effect on the economy's price-setting (PS) curve.

When a government uses tax revenue to fund public goods like education and infrastructure, the resulting long-term increase in labor ________ is the primary reason the price-setting (PS) curve may shift upward.

Evaluating Fiscal Policy Proposals

A country's government significantly increases corporate taxes and dedicates all the new revenue to building a nationwide high-speed internet network. Economists predicted this investment would boost labor productivity and cause an upward shift in the price-setting (PS) curve in the long term. However, after a decade, no such upward shift is observed. Which of the following is the most direct and fundamental explanation for this outcome within the model?